Reference no: EM132793646

Question - West Coat Company, operating at full capacity, sold 112,800 units at a price of $150 per unit during 2020. Its income statement for 2020 is as follows:

Sales 16,920,000

Cost of goods sold 6,000,000

Gross profit 10,920,000

Expenses

Selling expenses 3,000,000

Administration expenses 1,800,000 4,800,000

Operating income 6,120,000

Fixed Variable

Cost of sales 40% 60% Selling expenses 50% 50%

Administration expenses 70% 30%

Management is considering a plant expansion program that will permit an increase of $1,500,000 in yearly sales. The expansion will increase fixed costs by $200,000, but will not affect the relationship between sales and variable costs.

Required -

a) Compute total fixed costs and total variable costs.

b) Compute variable cost per unit and unit contribution margin.

c) Compute the breakeven point in units.

d) Compute the breakeven point in sales value.

e) Determine the amount of sales (units) that would be necessary under proposed program to realize the $6,120,000 of income from operations that was earned in 2020.