What level of sales would swann have to obtain to generate

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Reference no: EM131496125

Swann Systems is forecasting the following income statement for the upcoming year:

Sales $5,000,000

Operating costs (excluding depreciation) 3,000,000

Gross margin $2,000,000

Depreciation 500,000

EBIT $1,500,000

Interest 500,000

EBT $1,000,000

Taxes (40%) 400,000

Net income $ 600,000

The company’s president is disappointed with the forecast and would like to see Swann generate higher sales and a forecasted net income of $2,000,000.

Assume that operating costs (excluding depreciation) are always 60 percent of sales. Also, assume that depreciation, interest expense, and the company’s tax rate, which is 40 percent, will remain the same even if sales change.

What level of sales would Swann have to obtain to generate $2,000,000 in net income?

Reference no: EM131496125

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