Background Info:

Dillon, Jones, and Kline, Ltd. is studying the acquisition of two electrical component insertion systems for producing its sole product, the universal gismo. Data relevant to the systems follow.

Model A:

Variable costs, $16.00 per unit

Annual fixed costs, $986,400

Model B:

Variable costs, $11.80 per unit

Annual fixed costs, $1,113,900

The selling price is $70 per unit for the universal gismo, which is subject to a 5 percent sales commission. (In the following requirements, ignore income taxes.)

Question:

Assume Model B requires the purchase of additional equipment that is not reflected in the preceding figures. The equipment will cost $430,000 and will be depreciated over a five-year life by the straight-line method. How many units must the company sell to earn $970,000 of income if Model B is selected? As in requirement (2), sales and production are expected to average 49,000 units per year. (Do not round intermediate calculations and round final answer up to nearest whole number.)

FYI

The answer is not 39,669 units.