Question

Listed below is the 2015 income statement for Tom and Sue Travels, Inc.

TOM AND SUE TRAVELS, INC. Income Statement for Year Ending December 31, 2015 (in millions of dollars)
Net sales	$	16.600
Less: Cost of goods sold		7.500
Gross profits	$	9.100
Less: Other operating expenses		3.400
Earnings before interest, taxes, depreciation,   and amortization (EBITDA)	$	5.700
Less: Depreciation		2.300
Earnings before interest and taxes (EBIT)	$	3.400
Less: Interest		0.765
Earnings before taxes (EBT)	$	2.635
Less: Taxes		0.905
Net income	$	1.730

The CEO of Tom and Sue’s wants the company to earn a net income of $2.450 million in 2013. Cost of goods sold is expected to be 50 percent of net sales, depreciation and other operating expenses are not expected to change, interest expense is expected to increase to $0.865 million, and the firm’s tax rate will be 30 percent.

Calculate the net sales needed to produce net income of $2.450 million. (Enter your answer in millions of dollars rounded to 3 decimal places.)

Answer 1

	$ in millions
Net Income for the year	2.450
Add: Income Tax(2.450/.7 *.3)	1.050
Income Before Income Tax (a+b)	3.500
Add: Interest	0.865
Add: Depreciation	2.300
Add: other operating expenses	3.400
Gross profit (c+d+e+f)	10.065
Add: Cost of goods sold (g/.5 *.5)	10.065
Net Sales (g+h)	20.130