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Selling price per unit (package of 2 CDs)...................................... $20.00 Variable costs per unit: Direct material............................................................................................................... $4.00 Direct labor...................................................................................................................... $5.00 Artist's royalties.............................................................................................................. $3.50 Manufacturing overhead.......................................................................................... $3.00

Selling price per unit (package of 2 CDs)...................................... $20.00
Variable costs per unit:
Direct material............................................................................................................... $4.00
Direct labor...................................................................................................................... $5.00
Artist's royalties.............................................................................................................. $3.50
Manufacturing overhead.......................................................................................... $3.00
Selling expenses............................................................................................................ $1.00
Total variable costs per unit............................................................ $16.50
Annual fixed costs:
Manufacturing overhead.......................................................................................... $180,000
Selling and administrative....................................................................................... $220,000
Total fixed costs................................................................................ $400,000
Forecasted annual sales volume (120,000 units)......................... $2,400,000

How many units would ABC Inc. have to sell in order to earn operating income of $260,000?

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