Question

QS 18-9 CVP analysis and target income LO P2 SBD Phone Company sells its waterproof phone case for $107 per unit. Fixed costs total $197,000, and variable costs are $32 per unit. Compute the units of product that must be sold to earn pretax income of $224,500.

Answer 1

Break-even point in units= 5,620 units

Step-by-step explanation:

Giving the following information:

Selling price= $107 per unit.

Fixed costs total $197,000

Variable costs= $32 per unit.

Desired profit= $224,500

To calculate the number of units required to reach the objective, we need to use the following formula:

Break-even point in units= (fixed costs desired profit) / contribution margin per unit

Break-even point in units= (197,000 + 224,500) / (107 - 32)

Break-even point in units= 5,620 units