Break

$-$

Even Sales Under Present and Proposed Conditions

Darby Company, operating at full capacity, sold

$1$

$0$

$1$

$,$

$4$

$0$

$0$

$$units at a price of $

$1$

$3$

$5$

$$per unit during the current year. Its income statement is as follows:

Sales $

$1$

$3$

$,$

$6$

$8$

$9$

$,$

$0$

$0$

$0$

Cost of goods sold

$4$

$,$

$8$

$6$

$0$

$,$

$0$

$0$

$0$

Gross profit $

$8$

$,$

$8$

$2$

$9$

$,$

$0$

$0$

$0$

Expenses:

Selling expenses $

$2$

$,$

$4$

$3$

$0$

$,$

$0$

$0$

$0$

$$

Administrative expenses

$1$

$,$

$4$

$4$

$0$

$,$

$0$

$0$

$0$

$$

Total expenses

$3$

$,$

$8$

$7$

$0$

$,$

$0$

$0$

$0$

Income from operations $

$4$

$,$

$9$

$5$

$9$

$,$

$0$

$0$

$0$

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

$$ Variable Fixed

Cost of goods sold

$6$

$0$

$\%$

$4$

$0$

$\%$

$$

Selling expenses

$5$

$0$

$\%$

$5$

$0$

$\%$

$$

Administrative expenses

$3$

$0$

$\%$

$7$

$0$

$\%$

$$

Management is considering a plant expansion program for the following year that will permit an increase of $

$1$

$,$

$2$

$1$

$5$

$,$

$0$

$0$

$0$

$$in yearly sales. The expansion will increase fixed costs by $

$1$

$6$

$2$

$,$

$0$

$0$

$0$

$,$

$$but will not affect the relationship between sales and variable costs. $*$

$*$

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$*$

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