If the firm projects next year's sales to be $1,000,000, variable costs to be $250,000, fixed costs to be $250,000, depreciation to be $100,000 and income taxes to be $100,00, what is the firm's profit before taxes?

Question

Quizplus · Accepted Answer

Profit before taxes is calculated as Sales - Variable Costs - Fixed Costs - Depreciation. So, $1,000,000 - $250,000 - $250,000 - $100,000 = $400,000. Income taxes are not subtracted to find profit before taxes.

If the Firm Projects Next Year's Sales to Be $1,000,000