Question

Locus Company has total fixed costs of $112,000. Its product sells for $35 per unit and variable costs amount to $25 per unit. Next year Locus Company wishes to earn a pretax income that equals 10% of fixed costs. How many units must be sold to achieve this target income level?

A.1,120.
B. 8,214.
C.11,200.
D.12,320.
E.14,080.

Answer 1

D.12,320.

Step-by-step explanation:

The computation of the number of units to be sold for attaining the target income level is given below:

Target profit

= 10% of fixed cost

= 10% of 112,000

= 11200

Now

Sales needed = (Fixed costs +target profit) ÷ unit contribution margin

= (112,000+11,200) ÷ (35-25)

= 123,200 ÷ 10

= 12,320 units