Lewis Production Company had the following projected information for 2011: What level of sales dollars is needed to obtain a target before-tax profit of $75,000?

Question

Lewis Production Company had the following projected information for 2011:  What level of sales dollars is needed to obtain a target before-tax profit of $75,000?

Quizplus · Accepted Answer

To calculate the sales dollars needed to obtain a target before-tax profit of $75,000, we can use the following formula:
Sales - Variable Costs - Fixed Costs - Profit = Net Income
Since we know that the target before-tax profit is $75,000, we can rearrange the formula as follows:
Sales - Variable Costs - Fixed Costs - $75,000 = Net Income
We also know that the level of variable costs is 60% of sales, or 0.6S, and the level of fixed costs is $150,000. Substituting these values into the formula, we get:
S - 0.6S - $150,000 - $75,000 = Net Income
Simplifying the equation, we get:
0.4S = $225,000
Dividing both sides by 0.4, we get:
S = $562,500
Therefore, the level of sales dollars needed to obtain a target before-tax profit of $75,000 is $937,500 (since $562,500 + 0.6($562,500) + $150,000 + $75,000 = $937,500).

Lewis Production Company Had the Following Projected Information for 2011