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 $133,800.

Sales (41,000 units) $ 984,000
Costs:
Direct materials $ 235,800
Direct labor 241,600
Fixed factory overhead 108,000
Variable factory overhead 151,600
Fixed marketing costs 111,600
Variable marketing costs 51,600 900,200
Pretax income $ 83,800

47,757 units

Explanation:

To answer this we would need to first find the Contribution Margin. Contribution Margin is the differnce between the sales price and the variable cost per unit.

When the Fixed cost is divided by the Contribution margin, we get the BREAK-EVEN POINT which is where income is zero.

We will then add our required profit to find the Number of units needed.

Calculating the Variable costs we have,

= Direct Material + Direct Labor + Variable Factory overhead+ Variable Marketing Costs

= 235,800 + 241,600 + 151,600 + 51,600

= $680,600

Divide by the number of units to find the Variable cost per unit is,

= 680,609/41,000

= $16.6 per unit.

The Sales per unit will be,

= 984,000/41,000

= $24 per unit.

The Contribution Margin from earlier would therefore be,

= Sales - Variable Cost

= 24 - 16.6

= 7.4

Now we divide the Fixed Costs by that to find the Break-Even Point.

Fixed cost = Fixed factory overhead + Fixed marketing cost

= 111,600 + 108,000

= $219,000

Target sale in unit =Target profit + Fixed cost/Contribution per unit

= 133,800 + 219,000/7.4

= $353,400/7.4

= 47756.7567568

= 47,757

47,757 is the number of units that must be sold in order to achieve a target pretax income of $133,800.

47,757 units

Explanation:

Sales - Variable Cost - Fixed Overhead = Pretax Income

$984000 - $680,600 - $219,600 = $83,800

Let us divide the whole equation by 41,000 units to find the per unit sales, variable cost respectively;

Sales per unit = $984,000 / 41,000 units = $24 per unit

Variable Cost per unit = $680,600 / 41,000 units = $16.6 per unit

Contribution Margin per unit = Sales per unit - Variable Cost per unit

Contribution Margin  per unit = $24 per unit - $16.6 per unit = $7.4 per unit

Units Required for sale = (Fixed Cost + Target Profit) / Contribution Margin

Units Required for sale = ($219,600 + $133,800) / $7.4 per unit

Units Required for sale = 47,757 units

Burkett Corporation

Budgeted Income Statement

For coming Fiscal Year

Sales (47,757 units x $24 per unit) $1,146,162

Less: cost of goods manufactured (47,757 units x $16.6 per unit) $792,762

Contribution Margin $353,400

Less: Fixed Marketing and Factory Overhead $219,600

Pretax Income $133,800

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