Reference no: EM132755182
Question - 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 124,200 units at a price of $129 per unit during the current year. Its income statement for the current year is as follows:
Sales $16,021,800
Cost of goods sold $7,912,000
Gross profit $8,109,800
Expenses:
Selling expenses $3,956,000
Administrative expenses $3,956,000
Total expenses $7,912,000
Income from operations $197,800
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 $1,419,000 in yearly sales. The expansion will increase fixed costs by $141,900, but will not affect the relationship between sales and variable costs.
Required -
a. Determine the total variable costs and the total fixed costs for the current year. Enter the final answers rounded to the nearest dollar.
b. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year. Enter the final answers rounded to two decimal places.
c. Compute the break-even sales (units) for the current year. Enter the final answers rounded to the nearest whole number.
d. Compute the break-even sales (units) under the proposed program for the following year. Enter the final answers rounded to the nearest whole number.
e. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $197,800 of income from operations that was earned in the current year. Enter the final answers rounded to the nearest whole number.
f. Determine the maximum income from operations possible with the expanded plant. Enter the final answer rounded to the nearest dollar.
g. If the proposal is accepted and sales remain at the current level, what will the income or loss from operations be for the following year? Enter the final answer rounded to the nearest dollar.
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