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.

Sales (58,000 units) $ 986,000

Costs:
Direct materials $ 160,800
Direct labor 240,800
Fixed factory overhead 104,000
Variable factory overhead 150,800
Fixed marketing costs 110,800
Variable marketing costs 50,800 / 818,000
Pretax income $ 168,000

• 32,545.

• 134,970.

• 65,576.

• 50,800.

• 172,394.

Answer 1

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

Per Unit

Selling price [$986000/58000 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.