Summersville Production Company had the following projected information for 2016: 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 2016:  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 dollars needed to obtain a target before-tax profit of $75,000, we need to use the following formula: 
Sales - Variable costs - Fixed costs = Profit
Given:
Fixed costs = $150,000
Projected before-tax profit = $150,000
Projected sales = $1,500,000
Using the formula, we can solve for variable costs:
$1,500,000 - Variable costs - $150,000 = $225,000
Variable costs = $1,125,000
Now, to obtain a target before-tax profit of $75,000, we need to subtract it from the projected before-tax profit:
$150,000 - $75,000 = $75,000
Using the same formula as before, we can solve for the level of sales dollars needed:
Sales - $1,125,000 - $150,000 = $75,000
Sales = $1,350,000
Therefore, the level of sales dollars needed to obtain a target before-tax profit of $75,000 is $937,500 (Option D).

Summersville Production Company Had the Following Projected Information for 2016