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BeeGee Company, operating at full capacity, sold 1 5 0 , 0 0 0 units at a price of $ 1 1 6 per unit
BeeGee Company, operating at full capacity, sold units at a price of $ per unit during the current year. Its income statement is as follows:
The division of costs between variable and fixed is as follows:
Management is considering a plant expansion program for the following year that will permit an increase of $ in yearly sales. The expansion will increase fixed costs by $ but will not affect the relationship between sales and variable costs.
INSTRUCTIONS
a Determine the total variable costs and the total fixed costs for the current year.
b Determine a the unit variable cost and b the unit contribution margin for the current year.
c Compute the breakeven sales units for the current year.
d Compute the breakeven sales units under the proposed program for the following year.
e Determine the amount of sales units that would be necessary under the proposed program to realize the $ of income from operations that was earned in the current year.
f Determine the maximum income from operations possible with the expanded plant.
g 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?
h Based on the data given, would you recommend accepting the proposal? Explain.
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