A Company Has Variable Costs That Are 4/7 the Value

question 10

Multiple Choice

A company has variable costs that are 4/7 the value of their sales revenues. Total net income for the most recent period was a profit of $53 770 and sales were $420 000. The company has started a new marketing campaign that they hope will increase sales, but it will require additional advertising of $6400. How many sales dollars does the company have to generate in order to remain at the same level of profitability as before the new ad campaign?

• A) $434 933.33
• B) $326 357.50
• C) $420 210.00
• D) $140 396.67
• E) $105 297.50

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Definitions:

Current Liabilities

Short-term financial obligations that are due within one year or within the normal operating cycle of a business.

Accounts Receivable

Money owed to a business for goods or services that have been delivered or used but not yet paid for by customers.

Current Liabilities

Debts or obligations that are due to be paid within one year or within the normal operating cycle of the business, whichever is longer.

Accounts Receivable

Money owed to a business by its customers for goods or services that have been delivered but not yet paid for.