1.

Darby Company, operating at full capacity, sold 97,700 units at a price of $87 per unit during the current year. Its income statement is as follows:

Sales			$8,499,900
Cost of goods sold			3,016,000
Gross profit			$5,483,900
Expenses:
Selling expenses	$1,508,000
Administrative expenses	899,000
Total expenses			2,407,000
Income from operations			$3,076,900

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

	Variable		Fixed
Cost of goods sold	60%		40%
Selling expenses	50%		50%
Administrative expenses	30%		70%

Management is considering a plant expansion program for the following year that will permit an increase of $783,000 in yearly sales. The expansion will increase fixed costs by $104,400, but will not affect the relationship between sales and variable costs.

Required:

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

Total variable costs	$_________
Total fixed costs	$_________

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

Unit variable cost	$_________
Unit contribution margin	$_________

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

4. Compute the break-even sales (units) under the proposed program for the following year. ___________ units

5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $3,076,900 of income from operations that was earned in the current year. __________ units

6. Determine the maximum income from operations possible with the expanded plant. $_________

7. 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? $ _________ Income/Loss

8. Based on the data given, would you recommend accepting the proposal?

1. In favor of the proposal because of the reduction in break-even point.
2. In favor of the proposal because of the possibility of increasing income from operations.
3. In favor of the proposal because of the increase in break-even point.
4. Reject the proposal because if future sales remain at the current level, the income from operations will increase.
5. Reject the proposal because the sales necessary to maintain the current income from operations would be below the current year sales.

Choose the correct answer. ________

2.

Data related to the expected sales of laptops and tablets for Tech Products Inc. for the current year, which is typical of recent years, are as follows:

Products	Unit Selling Price		Unit Variable Cost		Sales Mix
Laptops	$190		$130		20%
Tablets	430		200		80%

The estimated fixed costs for the current year are $552,720.

Required:

1. Determine the estimated units of sales of the overall (total) product, E, necessary to reach the break-even point for the current year. ____________units

2. Based on the break-even sales (units) in part (1), determine the unit sales of both laptops and tablets for the current year.

Laptops:	____________units
Tablets:	_____________ units

3. Assume that the sales mix was 80% laptops and 20% tablets. Determine the estimated units of sales of the overall product necessary to reach the break-even point for the current year. ______________ units

Thanks!