Summersville Production Company had the following projected information for 2014: What level of sales dollars is needed to obtain a target before-tax profit of $75,000?

Question

Summersville Production Company had the following projected information for 2014:  What level of sales dollars is needed to obtain a target before-tax profit of $75,000?

Quizplus · Accepted Answer

To calculate the level of sales needed to obtain a target before-tax profit of $75,000, we can use the following formula:

Target before-tax profit = (Sales - Variable costs) - Fixed costs

Plugging in the given values:

$75,000 = (Sales - 0.60Sales) - $225,000

Solving for Sales:

$75,000 = 0.40Sales - $225,000 
$300,000 = 0.40Sales 
Sales = $750,000

Therefore, the required level of sales to obtain a target before-tax profit of $75,000 is $750,000.

Thus, the best choice is D.

Summersville Production Company Had the Following Projected Information for 2014