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 $218,000.

Answer 1

Solution and Explanation:

The number of units that must be sold in order to achieve a target pretax income of $218,000  

$= [Fixed cost + Required pre-tax income]/Contribution Margin per unit$

Calculation of contribution Margin per unit                        Selling price [$986000 divided by58000 units] $17.00             Less : Variable cost              - Direct Materials = $2.77             - Direct Labor = $4.15             - Variable Factory overheads = $2.60             - Variable Marketing cost = $0.88             Contribution Margin per unit = $6.60             Total Fixed cost            

Fixed factory overhead = $104,000.00             Fixed marketing costs =  $110,800.00             Total Fixed cost = $214,800.00            The number of units that must be sold in order to achieve a target pretax income of $218,000  

$=[\ 214800+\ 218000] / \ 6.60$ = 65576 units.