Question

SBD Phone Company sells its waterproof phone case for $90 per unit. Fixed costs total $162,000, and variable costs are $36 per unit. Compute the units of product that must be sold to earn pretax income of $200,000.

Answer 1

6,704 units

Step-by-step explanation:

The computation of the number of units sold is shown below:

= (Fixed expenses + target profit) ÷ (Contribution margin per unit)

where,

Contribution margin per unit = Selling price per unit - Variable expense per unit

= $90 per unit - $36 per unit

= $54 per unit

So, the number of units sold is

= ($162,000 + $200,000) ÷ ($54 per unit)

= 6,704 units