MacDonald Oil Co. expects sales of $1,000,000 and total variable costs of $600,000 for 2005. Total budgeted fixed costs are $200,000. What is the dollar amount of sales necessary to achieve pre-tax profits of $400,000?

Question

Quizplus · Accepted Answer

To find the necessary sales amount to achieve pre-tax profits of $400,000, we need to use the equation:

Sales - Variable Costs - Fixed Costs = Pre-tax Profit

Plug in the given values:

Sales - $600,000 - $200,000 = $400,000
Sales = $1,200,000

Therefore, the dollar amount of sales necessary to achieve pre-tax profits of $400,000 is $1,200,000. The correct answer is option (B).