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Break - Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 1 1 6 , 5 0 0 units at
BreakEven Sales Under Present and Proposed Conditions
Darby Company, operating at full capacity, sold units at a price of $ per unit during the current year. Its income statement is as follows:
Sales $
Cost of goods sold
Gross profit $
Expenses:
Selling expenses $
Administrative expenses
Total expenses
Income from operations $
The division of costs between variable and fixed is as follows:
Variable Fixed
Cost of goods sold
Selling expenses
Administrative expenses
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.
Determine the total variable costs and the total fixed costs for the current year.
Total variable costs $
Total fixed costs $
Determine a the unit variable cost and b the unit contribution margin for the current year.
Unit variable cost
Unit contribution margin
Compute the breakeven sales units for the current year.
Compute the breakeven sales units under the proposed program for the following year.
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.
Determine the maximum income from operations possible with the expanded plant.
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?
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