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2 March, 23:29

The managerial accountant at Donuts Galore needs to compute the target operating income to determine how much would need to be sold to earn a target net income of $900, assuming a 40% tax rate. To earn a target net income of $900, what is the target operating income?

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  1. 2 March, 23:56
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    To earn a target net income of $900, the target operating income must be $ 1500.

    Explanation:

    Target Net Income = Target Operating Income (1 - Tax Rate)

    Target Operating Income = Target Net Income / 1 - Tax Rate

    Target Operating Income = $900 / 1 - 40%

    Target Operating Income = $900 / 1-0.4

    Target Operating Income=$900/0.6

    Target Operating Income = $ 1500

    To earn a target net income of $900, the target operating income must be

    $ 1500

    Target Income Sales in Dollars = Target Income Sales in Units * Price per Unit
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