MC Qu. 90 Locus Company has total fixed costs ... Locus Company has total fixed costs of $117,000. Its product sells for $51 per unit and variable costs amount to $26 per unit. Next year Locus Company wishes to earn a pretax income that equals 50% of fixed costs. How many units must be sold to achieve this target income level?

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Business

Mohamed Carey

4 December, 02:22

MC Qu. 90 Locus Company has total fixed costs ... Locus Company has total fixed costs of $117,000. Its product sells for $51 per unit and variable costs amount to $26 per unit. Next year Locus Company wishes to earn a pretax income that equals 50% of fixed costs. How many units must be sold to achieve this target income level?

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Answers (1)

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Orion York · Answer 1

The correct answer is 7,020 units.

Explanation:

According to the scenario, the computation of the given data are as follows:

Fixed cost = $117,000

Selling price = $51

Variable cost = $26

Pretax income to earn = 50% of fixed cost

So, Pretax income = 50% * $117,000 = $58,500

So, we can calculate the units required by using following formula:

Units required = (Total fixed costs + Pretax income) : (Selling price - variable cost)

= ($117,000 + $58,500) : ($51 - $26)

= 7,020 units.