Zhao Company has fixed costs of $354,000. Its single product sells for $175 per unit, and variable costs are $116 per unit. Compute the units that must be sold to achieve a target income of $118,000.

To compute the number of units that Zhao Company must sell to achieve a target income of $118,000, we can use the **break-even formula** with a target income adjustment. The general formula for the required units to meet a target income is:

\[
\text{Units to sell} = \frac{\text{Fixed Costs} + \text{Target Income}}{\text{Selling Price per Unit} - \text{Variable Cost per Unit}}
\]

### Given:
- Fixed costs = $354,000
- Selling price per unit = $175
- Variable cost per unit = $116
- Target income = $118,000

### Step-by-step calculation:

1. **Contribution margin per unit** = Selling price per unit - Variable cost per unit:
   \[
   175 - 116 = 59 \, \text{per unit}
   \]

2. **Total required to cover** = Fixed costs + Target income:
   \[
   354,000 + 118,000 = 472,000
   \]

3. **Units to sell**:
   \[
   \frac{472,000}{59} = 8,000 \, \text{units}
   \]

### Conclusion:
Zhao Company needs to sell **8,000 units** to achieve a target income of $118,000.

Would you like more details or have any questions?

Here are 5 related questions to consider:
1. How would a change in variable costs affect the required units to be sold?
2. What would happen if the fixed costs increased by 10%?
3. How many units are needed to just break even (no target income)?
4. What is the company's contribution margin ratio?
5. How would a decrease in the selling price per unit affect the target income?

**Tip**: Understanding the contribution margin helps in analyzing the profitability of each unit sold.

Learn how to compute the number of units Zhao Company needs to sell to reach a target income of $118,000. This solution covers break-even analysis, contribution margin calculation, and profit targeting with detailed step-by-step calculations. Suitable for students in Grades 10-12.

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