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 $183,500. Sales (55,000 units) $ 990,000 Costs: Direct materials $ 202,000 Direct labor 240,500 Fixed factory overhead 102,500 Variable factory overhead 150,500 Fixed marketing costs 110,500 Variable marketing costs 50,500 856,500 Pretax income $ 133,500

Answer 1

To achieve a target pretax income of $183,500, you need to analyze the budgeted income statement provided and use the formula: Number of Units = (Target Pretax Income + Fixed Costs) / Unit Contribution Margin.

Step-by-step explanation:

To compute the number of units that must be sold in order to achieve a target pretax income of $183,500, you need to analyze the budgeted income statement provided. The statement shows that the firm's total costs, including both fixed and variable costs, are $856,500. The pretax income is $133,500.

To achieve the target pretax income, we can set up the following equation:

Total Revenues - Total Costs = Target Pretax Income

Substituting the given values, we have:

$990,000 - $856,500 = $183,500

To isolate the number of units to be sold, we can use the formula:

Number of Units = (Target Pretax Income + Fixed Costs) / Unit Contribution Margin

In this case, the Fixed Costs are $856,500 and the Unit Contribution Margin is the selling price minus variable costs per unit. The selling price per unit is given as $990,000 / 55,000 units, and the variable costs per unit are $856,500 / 55,000 units.

By plugging in these values, we can calculate the number of units that must be sold to achieve the target pretax income of $183,500.