Given the following information, how many units must be sold to achieve a profit

Question

Given the following information, how many units must be sold to achieve a profit of $21,000? (Note that the units sold must account for total production costs (direct and overhead) plus desired profit:

Direct labor hours:                                             0.6 hr / unit

Direct labor costs:                                           $25 / hr

Direct materials cost:                                      $5.1 / unit

Overhead costs:                                                 85% of direct labor

Packaging and shipping:                                  $2.6 / unit

Selling price:                                                     $38 / unit

Explanation / Answer

Total cost per unit = Direct Material cost + Direct labor cost + Overhead cost + Packaging and shipping cost

= $5.10 + (0.6hr x $25 per hr) + (85% of DL) + $2.60

= $5.10 + $15 + ($15 x 85%) + $2.60

= $22.70 + $12.75

= $35.45 per unit

Profit per unit = Selling price

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