Calculate Sales Revenue for Sunland Company

How much sales revenue will Sunland report when its net income equals $56000?

A. $1052800

B. $2856000

C. $770000

D. $3080000

Final answer:

Sunland Company needs to generate approximately $3080000 in sales revenue to report a net income of $56000, given that it has fixed costs of $560000 and a variable cost rate of 80% of sales.

Explanation:

In the given scenario, Sunland Company needs to determine its sales revenue when the net income equals $56000. To do this, we first need to understand the relationship between fixed costs, variable costs, sales revenue, and net income.

The company's total cost is the sum of fixed costs and variable costs. In this case, the variable costs are given as 80% of the sales, and the fixed costs are $560000. The net income is derived from subtracting the total costs from the sales revenue.

Therefore, we can set up the equation as follows: Sales Revenue - (Fixed Costs + 80% of Sales Revenue) = Net Income. Substituting the given values into the equation results in: Sales Revenue - ($560000 + 0.8*Sales Revenue) = $56000.

By further calculation, we find that the Sales Revenue should be approximately $3080000 in order for the net income to be $56000.