Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

4. Merchandising Operations

Net Sales

Financial Accounting

4. Merchandising Operations

Net Sales

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Multiple Choice

Estimating the sales volume required to earn a given amount of net income is known as:

Contribution margin analysis

Margin of safety calculation

Break-even analysis

Target profit analysis

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Verified step by step guidance

Understand the concept of Target Profit Analysis: It is a method used to determine the sales volume required to achieve a specific amount of net income or profit. This involves analyzing the relationship between sales, costs, and desired profit.

Identify the formula for Target Profit Analysis: The formula is derived from the Contribution Margin Income Statement. The equation is: \( \text{Required Sales Volume} = \frac{\text{Fixed Costs} + \text{Target Profit}}{\text{Contribution Margin per Unit}} \).

Break down the components of the formula: Fixed Costs are the costs that do not change with the level of production or sales. Target Profit is the desired net income. Contribution Margin per Unit is calculated as \( \text{Selling Price per Unit} - \text{Variable Cost per Unit} \).

Apply the formula to the problem: Substitute the values for Fixed Costs, Target Profit, and Contribution Margin per Unit into the formula. This will give the required sales volume in units.

Interpret the result: Once the sales volume is calculated, it represents the number of units that need to be sold to achieve the desired net income. This analysis helps businesses plan their sales strategies effectively.