Use the following information to estimate the taxable income for year 5.

Year	Sales in units
1	10,000
2	20,000
3	40,000
4	45,000
5	41,000
6	25,000

Unit price for sales in years 1 to 3: $50 and for years 4 to 6: $45

Variable Cost (VC) : $25 per unit

Fixed Cost (FC) : $50 000 per year

Initial Investment: $600,000

Salvage: $50,000 at the end of year 6

Tax rate: 34%

Cost of capital 15%

Depreciation method: prime cost to zero

Answer rating: 100% (QA)

To estimate the taxable income for Year 5 we need to calculate the following components Revenue This is the total sales revenue for Year 5 Variable Co... View the full answer