Question

Zhao Co. has fixed costs of $286,200. Its single product sells for $163 per unit, and variable costs are $110 per unit. Compute the level of sales in units needed to produce a target (pretax) income of $106,000.

Answer 1

Answer:

Break-even point in units= 7,400 units

Explanation:

Giving the following information:

Fixed costs= $286,200

Selling price= $163 per unit

Unitary variable costs= $110

Desired profit=  $106,000

To calculate the number of units to be sold, we need to use the break-even point formula:

Break-even point in units= (fixed costs + desired profit) / contribution margin per unit

Break-even point in units= (286,200 + 106,000) / (163 - 110)

Break-even point in units= 7,400 units