The <u>number of units</u> that must be sold to achieve $40,000 of operating income is 617 units.
<h3>What is break-even analysis?</h3>
Break-even analysis is an accounting concept that can be used to determine the <u>number of units</u> that must be sold to achieve $40,000 of operating income. This can be computed by using the concept of break-even analysis as follows:
<h3>Data and Calculations:</h3>
Sales units = 500 units
Sales revenue = $75,000
Selling price per unit = $150 ($75,000/500)
Variable costs = $28,000
Variable cost per unit = $56 ($28,000/500)
Contribution margin per unit = $94 ($150 - $56)
Fixed costs = $18,000
Target operating income = $40,000
Break-even point in units to achieve target profit = 617 units ($18,000 + $40,000)/$94
Thus, the <u>number of units</u> that must be sold to achieve $40,000 of operating income is 617 units.
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