Question

SBD Phone Company sells its waterproof phone case for $114 per unit. Fixed costs total $222,000, and variable costs are $34 per unit. Compute the units of product that must be sold to earn pretax income of $200,000.

Answer 1

Answer:

5,275

Explanation:

The targeted pretax income is the difference between the targeted total sales and the estimated total cost.

The total cost is the sum of the fixed and variable cost. The sales and variable cost are dependent on the level of activities or number of units produced and sold.

Contribution margin is the difference between the sales and variable cost.

Let the number of units to be sold be F

114F - 34F - 222,000 = 200,000

80F = 422,000

F = 422,000/80

= 5,275