Question

The budgeted income statement presented below is for Burkett Corporation for the coming fiscal year. Compute the number of units that must be sold in order to achieve a target pretax income of $130,000.
Sales (50,000 units) $1,000,000
Costs:
Direct materials $270,000
Direct labor 240,000
Fixed factory overhead 100,000
Variable factory overhead 150,000
Fixed marketing costs 110,000
Variable marketing costs 50,000 920,000
Pretax income $80,000

Answer 1

Answer:

Break-even point= 58,621 units

Explanation:

Giving the following information:

Compute the number of units that must be sold to achieve a target pretax income of $130,000.

Sales (50,000 units) $1,000,000

Costs:

Direct materials $270,000

Direct labor 240,000

Fixed factory overhead 100,000

Variable factory overhead 150,000

Fixed marketing costs 110,000

Variable marketing costs 50,000

First, we need to calculate the unitary variable cost and total fixed costs:

Unitary variable cost= (direct material + direct labor + variable overhead + variable marketing)/ units sold

Unitary variable cost= (270,000 + 240,000 + 150,000 + 50,000)/50,000= $14.2

Total fixed cost=210,000

Selling price= 1,000,000/50,000= $20

With this information, we can calculate the number of units required using the break-even point formula:

Break-even point= (fixed costs + desired profit) / contribution margin

Break-even point= (210,000 + 130,000)/ (20 - 14.2)

Break-even point= 58,621 units