Selling price per unit (package of 2 CDs)......................................

$23.00

Variable costs per unit:

Direct material...............................................................................................................

$4.00

Direct labor......................................................................................................................

$4.00

Artist's royalties..............................................................................................................

$4.00

Manufacturing overhead..........................................................................................

$3.00

Selling expenses............................................................................................................

$2.50

Total variable costs per unit............................................................

$17.50

Annual fixed costs:

Manufacturing overhead..........................................................................................

$188,000

Selling and administrative.......................................................................................

$272,000

Total fixed costs................................................................................

$460,000

Forecasted annual sales volume (120,000 units).........................

$2,760,000

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