Goy Company has a break-even point of 88,000 units.The contribution margin per unit is $9.60.The desired pre-tax profit is $18,096.How many units must be sold to achieve the desired profit?
A)1,885 units
B)88,000 units
C)89,885 units
D)indeterminate

Question

Quizplus · Accepted Answer

To calculate the desired units to achieve the pre-tax profit, we use the formula:

(desired profit + fixed costs) / contribution margin per unit

In this case, the fixed costs equal the break-even point, which is 88,000 units. So:

(desired profit + 88,000) / $9.60 = X

Where X is the desired units to achieve the pre-tax profit. Solving for X:

($18,096 + 88,000) / $9.60 = 9,488

Therefore, Goy Company must sell 89,885 units to achieve the desired pre-tax profit of $18,096.

Goy Company Has a Break-Even Point of 88,000 Units