Income statement

8. Van Auken Industries is forecasting the following income statement for the upcoming year:

Sales

$5,074,073

Operating Costs (excluding depreciation)

2,790,740

Depreciation

725,000

EBIT

$1,558,333

Interest

225,000

EBT

$1,333,333

Taxes (40%)

533,333

Net Income

$ 800,000

Assume that operating costs (excluding depreciation) are always 55% of sales. Also assume that depreciation, interest expense, and the company's tax rate of 40% (not total taxes paid), will remain the same, even if sales change.

The company's president is disappointed with the forecast and would like to see Van Auken generate higher sales and a forecasted net income of $1,000,000. What level of sales would Van Auken have to obtain in order to generate $1,000,000 in net income?

a. $ 5,814,816

b. $ 6,333,450

c. $ 7,222,100

d. $ 8,000,000

e. $ 9,775,125