Question

TOM AND SUE TRAVELS, INC. Income Statement for Year Ending December 31, 2015 (in millions of dollars)
Net sales	$	19.600
Less: Cost of goods sold		9.000
Gross profits	$	10.600
Less: Other operating expenses		4.150
Earnings before interest, taxes, depreciation,   and amortization (EBITDA)	$	6.450
Less: Depreciation		3.800
Earnings before interest and taxes (EBIT)	$	2.650
Less: Interest		0.840
Earnings before taxes (EBT)	$	1.810
Less: Taxes		0.755
Net income	$	1.055

The CEO of Tom and Sue’s wants the company to earn a net income of $3.500 million in 2013. Cost of goods sold is expected to be 60 percent of net sales, depreciation and other operating expenses are not expected to change, interest expense is expected to increase to $0.940 million, and the firm’s tax rate will be 30 percent.

Calculate the net sales needed to produce net income of $3.500 million. (Enter your answer in millions of dollars rounded to 3 decimal places.)

Answer 1

net sale	34.725
Less: Cost of goods sold [34.725 * 0.6]	20.835
Gross profits	13.89
Less: Other operating expenses	4.150
Earnings before interest, taxes, depreciation,   and amortization (EBITDA)	9.74
Less: Depreciation	3.800
Earnings before interest and taxes (EBIT)	5.94
Less: Interest	0.940
Earnings before taxes (EBT) (3.500/0.7*1)	5
less: tax	1.5
Net income	3.500

Note:- net sale - cost of goods sold = gross profit

let net sale be x ,

   x - 0.6*x = $13.89

   0.4 x = $13.89

x = $34.725

So, the net sale is $34.725