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Hebner Housing Corporation: Required level of sales to meet financial goals.

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Hebner Housing Corporation has forecast the following numbers for this upcoming year:

? Sales = $1,000,000.
? Cost of goods sold = 600,000.
? Interest expense = 100,000.
? Net income = 180,000.

The company is in the 40 percent tax bracket. Its cost of goods sold always represents 60 percent of its sales. That is, if the company's sales were to increase to $1.5 million, its cost of goods sold would increase to $900,000.

The company's CEO is unhappy with the forecast and wants the firm to achieve a net income equal to $240,000. In order to achieve this level of net income, what level of sales will the company have to achieve? Assume that Hebner's interest expense remains constant.

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Solution Summary

With five lines of calculations, the response solves the problem.

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Net Income = (Sales - COGS - Interest Expense) (1 - 0.4)
COGS = ...

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