Question

Flannigan Company manufactures and sells a single product that sells for $450 per unit; variable costs are $300. Annual fixed costs are $870,000. Current sales volume is $4,200,000. Flannigan Company management targets an annual pre-tax income of $1,125,000. Compute the dollar sales to earn the target pre-tax net income. A. $5,990,990. B. $5,640,000. C. $2,991,004. D. $2,612,613. E. $3,378,378.

Answer 1

Answer:

$5985,000

Explanation:

The computation of the sales amount in dollars is shown below:

= (Fixed cost + pre tax income) ÷ (Profit volume ratio)

where,  

Profit volume ratio = Contribution margin per unit ÷ Selling price per unit × 100

= $150  ÷ 450 × 100

= 33.33%

Contribution margin per unit = Selling price per unit - variable cost per unit

= $450 - $300

= $150

And, the fixed cost is $870,000 and pre tax income is $1,125,000

Now put these values to the above formula

So, the per unit would be equal to

= ($870,000 + $1,125,000)  ÷ 33.33%

= $5985,000

This is the answer but the same is not provided in the given options