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    Volume sales and before tax profit

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    BOOM, Inc., manufactures and sells dynamite. A projected income statement for the expected sales volume of 1,500,000 cases is as follows:

    Sales $4,500,000
    Variable expenses 1,000,000
    Contribution margin $3,500,000
    Fixed expenses 2,000,000
    Before-tax profit $1,500,000

    How many cases would need to be sold to have a before-tax profit of $2,150,000?

    a. 1,100,000 cases d. 1,778,572 cases
    b. 1,305,523 cases e. 1,933,842 cases
    c. 1,589,331 cases f. none of the above

    What dollar sales volume would be required to achieve $4,000,000 of before-tax profit?

    a. $6,845,100 b. $7,714,287 c. $9,354,006 d. $10,522,992

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    Solution Preview

    The first thing you need to do is take the before tax profit and add fixed expenses since fixed expenses don't change regardless of amount of units sold.
    <br>So now we have 4,150,000 contribution margin for the first question (2,150,000 before tax profit plus the fixed expenses of 2,000,000)
    <br>We also know that in the projected problem there are 1,500,000 cases and the sales are ...