Before-Tax Profit Problem

craig · 11-30-2010, 04:16 PM

I don't think there is enough info to solve this. Maybe I am looking too hard for data. I keep coming up with $375,00

Lewis Production Company had the following projected information for 2011:

Selling price per unit $150
Variable cost per unit $90
Total fixed costs $300,000

What level of sales dollars is needed to obtain a target before-tax profit of $75,000?
a. $375,000
b. $625,000
c. $750,000
d. $937,500

Ronika · 12-01-2010, 12:10 AM

Hi Craig,

You need to use the following formula =

(Fixed costs + profit)/(Selling Price - Variable Cost)

The answer is 6250 units or $937,500 in sales. You should first calculate the profit using this number of units to try and understand the formula.

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