Question

The ABC Distributing (ABC) 2019 profit and loss statement is shown below. The depicted relationships are valid within $14,000,000.00 to $65,000,000.00. What level of sales would a new salesperson have to produce if annual costs (salary, expenses, and other traceable costs) were $60,000 and ABC wanted to make a 10% return (ROS) on the incremental sales?

                                        ABC 2019 Profit and Loss Statement*

Sales	$	20,000,000
Cost of goods sold		12,000,000
Gross margin		8,000,000
Variable costs		2,000,000
Fixed costs		5,000,000
Total costs		7,000,000
Profit (before taxes)	$	1,000,000

                                          *Taxes are eliminated from the analysis to simplify and focus the calculations.

Answer 1