Question
Battonkill Company, operating at full capacity, sold 127,900 units at a price of $78 per unit during the current year. Its income statement for the
Battonkill Company, operating at full capacity, sold 127,900 units at a price of $78 per unit during the current year. Its income statement for the current year is as follows: Sales $9,976,200 Cost of goods sold 3,536,000 Gross profit $6,440,200 Expenses: Selling expenses $1,768,000 Administrative expenses 1,066,000 Total expenses 2,834,000 Income from operations $3,606,200 The division of costs between fixed and variable is as follows: Fixed Variable Cost of goods sold 40% 60% Selling expenses 50% 50% Administrative expenses 70% 30% Management is considering a plant expansion program that will permit an increase of $780,000 in yearly sales. The expansion will increase fixed costs by $104,000, but will not affect the relationship between sales and variable costs. Required: 1. Determine for the current year the total fixed costs and the total variable costs
Break-Even Sales Under Present and Proposed Conditions Battonkill Company, operating at full capacity, sold 127,900 units at a price of $78 per unit during the current year. Its income statement for the current year is as follows Sales Cost of goods sold Gross profit Expenses 39,976,200 3,536,000 $6,440,200 Selling expenses Administrative expenses $1,768,000 1,066,000 Total expenses 2,834,000 Income from operations $3,606,200 The division of costs between fixed and variable is as follows Fixed Variable Cost of goods sold Selling expenses Administrative expenses Management is considering a plant expansion program that will permit an increase of $780,000 in yearly sales. The expansion will increase fixed costs by $104,000, but will not affect the relationship between sales and variable costs Required 1. Determine for the current year the total fixed costs and the total variable costs. Total fixed costs Total variable costs 40% 60% 50% 50% 70% 30% 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 sasnts) under the proposed program. units 5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $3,606,200 of income from operations that was earned in the current year. units 6. Determine the maximum income from operations possible with the expanded plantStep by Step Solution
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