Question

Duck Manufacturing sells rubber rain boots for $50 per pair. In the coming year, the firm expects to have fixed costs of $312,000 and variable costs of $24 per pair. If Duck wants to earn net income of $364,000 in the year ahead, what are the firm's required sales in dollars?

A) $675,000
B) $780,000
C) $1,000,000
D) $1,124,000

Answer 1

To achieve a net income of $364,000, Duck Manufacturing must generate $1,600,000 in sales, calculated using the break-even sales formula. However, this calculated amount does not match any of the provided options.

Step-by-step explanation:

The student's question involves calculating the required sales in dollars for Duck Manufacturing to earn a net income of $364,000. To find this, we must use the equation for break-even sales in dollars, which is:

Break-even sales = Fixed Costs + Desired Profit / (Price per unit - Variable Cost per unit)

Given that the fixed costs are $312,000, the desired net income is $364,000, the selling price per pair of boots is $50, and the variable cost per pair is $24, our calculation becomes:

Required sales = ($312,000 + $364,000) / ($50 - $24) = $676,000 / $26

Required sales = $1,600,000.

However, none of the provided options (A) $675,000, (B) $780,000, (C) $1,000,000, (D) $1,124,000 match the calculated figure. This suggests a potential error in the question since the correct answer should be $1,600,000 based on calculations.