Zhao Co. has fixed costs of $286,200. Its single product sells for $163 per unit, and variable costs are $110 per unit. Compute the level of sales in units needed to produce a target (pretax) income of $106,000.

The level of sales in units is 7,400

Explanation:

The computation of the level of sales in units is shown below:

= (Fixed cost + target income) ÷ (Contribution margin per unit)

= ($286,200 + $106,000) ÷ ($163 per unit - $110 per unit)

= $392,200 ÷ $53 per unit

= 7,400 units

The Contribution margin per unit is

= Selling price per unit - variable cost per unit

Henec, the level of sales in units is 7,400

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