Wang Co.manufactures and sells a single product that sells for $450 per unit; variable costs are $270 per unit.Annual fixed costs are $800,000.Current sales volume is $4,200,000.Management targets an annual pre-tax income of $1,125,000.
-Compute the dollar sales to earn the target pre-tax net income.
A)$5,640,000.
B)$4,812,500.
C)$3,378,378.
D)$2,991,004.
E)$2,612,613.

Question

Quizplus · Accepted Answer

We can use the formula:

(Sales price per unit x Units sold) - (Variable cost per unit x Units sold) - Fixed costs = Profit

We are given the following information:
Sales price per unit = $450
Variable cost per unit = $270
Fixed costs = $800,000
Target pre-tax income = $1,125,000

Let's represent Units sold as "x". We can then plug in the values and solve for x:

($450 x) - ($270 x) - $800,000 = $1,125,000
$180 x = $1,925,000
x = 10,694 units

To find the dollar sales, we can simply multiply the number of units sold by the sales price per unit:

10,694 units x $450 per unit = $4,812,500

Therefore, the best choice is B, which represents the dollar sales required to earn the target pre-tax net income.

Wang CoManufactures and Sells a Single Product That Sells for $450