Ballywide Company, operating at full capacity, sold 94,500 units at a price of $110 per unit during 2015. Its income statement for 2015 is as follows

Sales $10,395,000

Cost of goods sold 5,000,000

Gross profit --------------------------

5,395,000

Expenses:

Selling expenses 2,800,000

Administrative expenses 1,720,000

Total expenses 4,520,000

-----------------------------

Income from operations $875,000

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

Fixed Variable

Cost of sales 42% 58%

Selling expense 44% 56%

Administrative expenses 65% 35%

Management is considering a plant expansion program that will permit an increase of $1,400,000 in yearly sales. The expansion will increase fixed costs by $135,000 but will not affect the relationship between sales and variable costs. a. Determine for 2015 the total fixed costs and the total variable costs.

b. Determine for 2015 (1) the unit variable cost and (2) the unit contribution margin.

c. Compute the break even sales in units for 2015.

d. Compute the break even sales in units under the proposed program.

e. Determine the amount of sales in units that would be necessary under the proposed program to realize the $875,000 of income from operations that was earned in 2015.

f. Determine the maximum income from operations possible with the expanded plant.

g. If the proposal is accepted and sales remain at the 2015 level, what will the income or loss from operations be for 2016?

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