Reference no: EM132946680

Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $189 per unit during the current year. Its income statement is as follows:

Sales $189,000,000

Cost of goods sold (99,000,000)

Gross profit $90,000,000

Expenses: Selling expenses$14,000,000

Administrative expenses18,400,000

Total expenses (32,400,000)

Operating income $57,600,000

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

                               Variable                        Fixed

Cost of goods sold          70%                          30%

Selling expenses              75%                           25%

Administrative expenses     50%                           50%

Management is considering a plant expansion program for the following year that will permit an increase of $11,340,000 in yearly sales. The expansion will increase fixed costs by $4,500,000 but will not affect the relationship between sales and variable costs.

Required:

Problem 1. Determine the total variable costs and the total fixed costs for the current year.

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

Problem 3. Compute the break-even sales (units) for the current year.