Hughes Company manufactures harmonicas which it sells for $31 each. Variable costs for each unit are $18 and total fixed costs are $3,925. How many units must be sold to earn income of $5,500?

These are the options for the question:

A) 725

B) 423

C) 304

D) 524

And this is the correct answer:

A) 725

Explanation:

The total gross revenue under that level of production is: 725 x $31 = $22,475.

The variable costs are: 725 x $18 = $13,050

And the fixed costs are = $3,925

Now we simply substract the total variable costs and fixed costs from the gross revenue to obtain our desired net income:

$22,475 - $13,050 - $3,925 = $5,500