Final answer:
The statement is true; the Target Net Income can indeed be determined using the break-even analysis approaches by incorporating the desired net income into the formula, adjusting for total sales required.
Step-by-step explanation:
The statement that the Target Net Income can be determined from each of the approaches used to determine break-even sales/units is true. Determining the break-even point involves understanding the relationship between revenues, fixed costs, and variable costs.
However, when a firm aims to achieve a specific net income, it needs to calculate the amount of sales necessary to cover not just the fixed and variable costs but also to achieve the desired net income level. This requires adjusting the break-even formula to include the target net income.
In essence, businesses calculate the target net income by setting a profit goal and back-calculating the amount of sales required to achieve that goal after covering all expenses. The formula for achieving the target net income is:
Target Net Income = Total Revenue - (Total Variable Costs + Total Fixed Costs)
To determine the sales level needed to achieve the target net income, businesses use the following equation:
Required Sales = (Total Fixed Costs + Target Net Income) / (1 - Variable Cost Ratio)
Where Variable Cost Ratio is the proportion of variable costs to the price.