Lewis Production Company had the following projected information for 2004: What level of monetary sales is needed to obtain a target before-tax profit of £75,000?

A) £375,000
B) £625,000
C) £750,000
D) £937,500

Question

Lewis Production Company had the following projected information for 2004: What level of monetary sales is needed to obtain a target before-tax profit of £75,000?

A) £375,000 
B) £625,000 
C) £750,000 
D) £937,500

Quizplus · Accepted Answer

To determine the required level of monetary sales, we need to use the following formula:
Required Sales = (Target Profit + Fixed Costs) ÷ Contribution Margin Ratio
Substituting the given values, we get:
Required Sales = (£75,000 + £300,000) ÷ 0.4
Required Sales = £937,500
Therefore, the required level of monetary sales to obtain a target before-tax profit of £75,000 is £937,500. Option D is the correct answer.

Lewis Production Company Had the Following Projected Information for 2004