Montoya Manufacturing has fixed costs of $2,500,000 and variable costs are 40% of sales.What are the required sales if Montoya desires net income of $250,000?
A)$4,583,333
B)$4,166,667
C)$6,875,000
D)$6,250,000

Question

Quizplus · Accepted Answer

Net income = Sales - (Fixed costs + Variable costs)$250,000 = Sales - ($2,500,000 + 0.40 * Sales)$250,000 = Sales - $2,500,000 - 0.40 * Sales$250,000 + 0.40 * Sales = Sales - $2,500,0000.60 * Sales = $2,500,000 + $250,0000.60 * Sales = $2,750,000Sales = $2,750,000 / 0.60Sales = $4,583,333

Montoya Manufacturing Has Fixed Costs of $2,500,000 and Variable Costs