The Pine Tree Company is currently operating at its maximum capacity. Its budgeted income statement at maximum capacity of \(1,000,000\) units per year is as follows:

The company is considering an expansion of its facility because the company expects that sales could be increased to \(1,200,000\) units per year. The company's engineering studies indicate that the increased volume of 200,000 units could be obtained through an additional facility that would cost \(\$ 250,000\) of fixed factory cost a year. However, the variable production cost and variable selling and administrative expenses are expected to decrease by 5 percent.
{Required:}
(1) Calculate the breakeven points before and after expansion.
(2) What dollar sales volume must be obtained after expansion to make as much income as before expansion?
(3) Calculate sales volume in units after expansion to earn an income of \(\$ 800,000\) before income taxes.

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The Pine Tree Company Budgeted Income Statement For Any Year Operating at Maximum Capacity Sales (1,000,000 units @ $5) Cost of goods sold: Variable............ Fixed........ Gross profit Selling and administrative expenses: Variable.......... Fixed. Operating income $ 5,000,000 2,500,000 1,000,000 3,500,000 1,500,000 400,000 400,000 800,000 $ 700,000