Explore BrainMass

Volume sales and before tax profit


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


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 ...