Question

Zhao Co. has fixed costs of $378,200. Its single product sells for $179 per unit, and variable costs are $118 per unit. Compute the level of sales in units needed to produce a target (pretax) income of $122,000.

Answer 1

Answer:

8,200 units

Explanation:

Given that,

Fixed costs = $378,200

Selling price = $179 per unit

Variable costs = $118 per unit

Target (pretax) income = $122,000

Contribution margin:

= Selling price - Variable costs

= $179 per unit - $118 per unit

= $61 per unit

Unit sales at a desired profit of $122,000:

= (Fixed expenses + Target profit) ÷ Contribution margin

= ($378,200 + $122,000) ÷ $61 per unit

= $500,200 ÷ $61 per unit

= 8,200 units