Reference no: EM132657201

Determine the amount of sales (units) that would be necessary under Break-Even Sales Under Present and Proposed Conditions

Darby Company, operating at full capacity, sold 109,350 units at a price of $45 per unit during the current year. Its income statement for the current year is as follows:

Sales $4,920,750

Cost of goods sold 2,430,000

Gross profit $2,490,750

Expenses: Selling expenses$1,215,000

Administrative expenses1,215,000

Total expenses 2,430,000

Income from operations $60,750

The division of costs between fixed and variable 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 that will permit an increase of $450,000 in yearly sales. The expansion will increase fixed costs by $45,000, but will not affect the relationship between sales and variable costs.

Problem 1: Compute the break-even sales (units) under the proposed program for the following year. Enter the final answers rounded to the nearest whole number.

Problem 2: Determine the amount of sales (units) that would be necessary under the proposed program to realize the $60,750 of income from operations that was earned in the current year. Enter the final answers rounded to the nearest whole number.

Problem 3: Determine the maximum income from operations possible with the expanded plant. Enter the final answer rounded to the nearest dollar.