Answer (C) is correct . Revenue minus variable and fixed expenses equals net income. If X equals unit sales, revenue equals $25X, total variable expenses equal $16X ($4 + $7 + $2 + $3), total fixed expenses equal $585,000 ($360,000 + $225,000), and net income equals 10% of revenue. Hence, X equals 90,000 units. $25X – $16X – $585,000 = $25X × 10% 6.5X = $585,000 X = 90,000 units
Answer (A) is incorrect because The breakeven point is 65,000 units.
Answer (B) is incorrect because It produces a net loss.
Answer (D) is incorrect because The amount of 25,000 is the excess of the required units over the breakeven point.
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How many units does XYZ Company need to produce and sell to make a before-tax profit of 10% of sales?