Question

The budgeted income statement presented below is for Burkett Corporation for the coming fiscal year.

Sales (47,000 units) $987,000
Costs:
Direct materials $209,400
Direct labor 241,300
Fixed factory overhead 106,500
Variable factory overhead 151,300
Fixed marketing costs 111,300
Variable marketing costs 51,300 871,100
Pretax income $115,900
Compute the number of units that must be sold in order to achieve a target pretax income of $165,900.

Answer 1

Burkett Corporation

The number of units that must be sold in order to achieve a target pretax income of $165,900 is:

= 54,042 units.

Step-by-step explanation:

a) Data and Calculations:

Total Per Unit

Sales (47,000 units) $987,000 $21.00

Costs:

Direct materials $209,400

Direct labor 241,300

Variable factory overhead 151,300

Variable marketing costs 51,300

Total variable costs $653,300 $13.90

Contribution margin $333,700 $7.10 ($21 - $13.90)

Fixed factory overhead 106,500

Fixed marketing costs 111,300

Total fixed costs $217,800

Pretax income $115,900 165,900

To achieve a target profit of $165,900, units that must be sold

= (Total fixed costs + Target profit)/Contribution margin per unit

= ($217,800 + $165,900)/$7.10

= $383,700/$7.10

= 54,042 units