Flannigan company manufactures and sells a single product that sells for $450 per unit; variable costs are $270. annual fixed costs are $800,000. current sales volume is $4,200,000. flannigan company management targets an annual pre-tax income of $1,125,000. compute the unit sales to earn the target pre-tax net income. multiple choice 4,444. 7,500. 6,650.

Hi your question lacks the number of units sold hence i will give you the total sales to earn the pre-tax net income

$4812500 ( total sales to earn the pre-tax net income )

Explanation:

selling price of a single product = $450

variable cost = $270

contribution margin = selling price - variable cost

                                 = 450 - 270 = $180

contribution margin ratio = contribution margin / selling price

                                          = 180 / 450 = 0.4 = 40%

Annual fixed cost = $800000

Annual pre income tax = $1125000

Therefore the required contribution margin will be = annual fixed cost + annual pre income tax

= 800000 + 1125000

= $1925000

hence to get the sales to earn pre tax net income will be

required contribution margin / contribution margin ratio

= 1925000 / 0.4  

= $4812500 ( total sales to earn the pre-tax net income )

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