Break$-$Even Sales Under Present and Proposed Conditions

Kearney Company, operating at full capacity, sold $148,400$ units at a price of $$108$ per unit during $20Y5.$ Its

income statement for $20Y5$ is as follows:

Expenses:

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

Management is considering a plant expansion program that will permit an increase of

units at $$108$ per unit$)$ in yearly sales. The expansion will increase fixed costs by $$172,800,$ but will not

affect the relationship between sales and variable costs.

Instructions:

Determine for $20Y5$ the total fixed costs and the total variable costs.

Total fixed costs $

Total variable costs

Determine for $20Y5($a$)$ the unit variable cost and $($b$)$ the unit contribution margin.

a$.$ Unit variable cost $$,$ per unit

b$.$ Unit contribution margin s

$$ per unit

Compute the break$-$even sales $($units$)$ for $20Y5.$

$$ units

Compute the break$-$even sales $($units$)$ under the proposed program.

$$ units

Determine the amount of sales $($units$)$ that would be necessary under the proposed program to realize

the $$5,803,200$ of operating income that was earned in $20Y5.$

$$ units

Determine the maximum operating income possible with the expanded plant.

$ $x$

If the proposal is accepted and sales remain at the $20Y5$ level, what will be the operating income or loss

for $20Y6?$