Reference no: EM132965184

Kearney Company, operating at full capacity, sold 154,100 units at a price of $51 per unit during 20Y5. Its income statement for 20Y5 is as follows:

Sales $7,859,100

Cost of goods sold (2,788,000)

Gross profit $5,071,100

Expenses:

Selling expenses $1,394,000

Administrative expenses 833,000

Total expenses (2,227,000)

Income from operations $2,844,100

The division of costs between fixed and variable is as follows:

                                     Fixed           Variable

Cost of good sold          40%                  60%

Selling expenses             50%                 50%

Administrative expenses  70%                 30%

Management is considering a plant expansion program that will permit an increase of $612,000 (12,000 units at $51 per unit) in yearly sales. The expansion will increase fixed costs by $81,600, but will not affect the relationship between sales and variable costs.

Instructions:

Problem 1. Determine for 20Y5 the total fixed costs and the total variable costs.

Problem 2. Determine for 20Y5 (a) the unit variable cost and (b) the unit contribution margin.