Solution and Explanation:
The number of units that must be sold in order to achieve a target pretax income of $218,000
[tex]$=$ [Fixed cost + Required pre-tax income]/Contribution Margin per unit[/tex]
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
[tex]=[\$ 214800+\$ 218000] / \$ 6.60[/tex] = 65576 units.
