Cost classification and target profit Walt’s Woodwork Company makes and sells wooden shelves. Walt’s carpenters make the shelves in the company’s rented building. Walt has a separate office at another location that also includes a showroom where customers can view sample shelves and ask questions of salespeople. The company sells all the shelves it produces each year and keeps no inventories. The following information pertains to Walt’s Woodwork Company for the past year:
a. Units produced and sold................ 50,000
b. Sales price per unit.................... $70
c. Carpenter labor to make shelves............. 600,000
d. Wood to make the shelves................ 450,000
e. Sales staff salaries................... 80,000
f. Office and showroom rental expenses........... 150,000
g. Depreciation on carpentry equipment............. 50,000
h. Advertising..................... 200,000
i. Sales commissions based on number of units sold....... 180,000
j. Miscellaneous fixed manufacturing overhead........ 150,000
k. Rent for the building where the shelves are made....... 300,000
l. Miscellaneous variable manufacturing overhead...... 350,000
m. Depreciation for office equipment........... 10,000
Required
Make appropriate assumptions about cost behavior and assume that direct labor costs vary directly with the number of units produced. How many units must the company sell in order to earn a pretax profit of $500,000?