Flannigan Company manufactures and sells a single product that sells for $450 per unit;variable costs are $300.Annual fixed costs are $870,000.Current sales volume is $4,200,000.Flannigan Company management targets an annual pre-tax income of $1,125,000.Compute the dollar sales to earn the target pre-tax net income.

Question

Quizplus · Accepted Answer

To find the dollar sales to earn the target pre-tax net income, we can use the following formula:

(Target pre-tax income + Fixed costs) / Contribution margin ratio

Contribution margin ratio = (Sales price - Variable cost) / Sales price = (450 - 300) / 450 = 1/3

Plugging in the numbers, we get:

(1,125,000 + 870,000) / (1/3) = 5,990,990

Therefore, the answer is B, $5,990,990.

Flannigan Company Manufactures and Sells a Single Product That Sells