2. Based on the data given in the previous problem, would you recommend accepting the proposal?

Miami Corporation was operating at full capacity; they sold 500,000 units at $94 each during the current year. Their income statement is as follows: Sales Cost of Goods Sold 47,000,000 25,000,000 22,000,000 Gross Profit Selling Expenses Admin Expenses Total Expenses Income from Operations 4,000,000 3,000,000 7,000,000 $15,000,000 The division of costs between variable and fixed is as follows: Variable Fixed Cost of goods sold 70% 30% 75% 25% Selling expenses Administrative expenses 50% 50% Management is considering a plant expansion program for the following year that will permit an increase of $3,760,000 in yearly sales. The expansion will increase fixed costs by $1,800,000 but will not affect the relationship between sales and variable costs. Instructions 1. Determine the total variable costs and the total fixed costs for the current year. 2. Determine (A) the unit variable cost and (B) the unit contribution margin for the current year. 3. Compute the break-even sales (units) for the current year. 4. Compute the break-even sales (units) under the proposed program for the following year. 5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $15,000,000 of income from operations that was earned in the current year. 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