Gaither Mack is preparing projected financial statements to include in the business plan he is preparing for the launch of a specialty retail store. Using published financial statistics, Mack finds that the typical net profit margin for a store like his is 7.3 percent. If Mack's target income for his first year of operation is $32,000, what level of sales must he achieve to reach it?
A)$233,600
B)$438,356
C)$2,966,400
D)Cannot be determined from the information provided

Question

Quizplus · Accepted Answer

We can use the formula:

Net profit margin = Net income / Sales

We can rearrange this to solve for sales:

Sales = Net income / Net profit margin

If Mack's target net income is $32,000 and the net profit margin is 7.3%, then:

Sales = $32,000 / 0.073

Sales = $438,356

Therefore, Mack must achieve $438,356 in sales to reach his target income for the first year of operation. The correct answer is B.

Gaither Mack Is Preparing Projected Financial Statements to Include in the Business