Break$-$even sales under present and proposed conditions

Portmann Company, operating at full capacity, sold $1,000,000$ units at a price of $$187$ per unit during the current year. Its income statement is as follows:

Line Item Description Amount Amount

Sales $$187,000,000$

Cost of goods sold $(98,000,000)$

Gross profit $$89,000,000$

Expenses:

Selling expenses $$15,000,000$

Administrative expenses $14,300,000$

Total expenses $(29,300,000)$

Operating income $$59,700,000$

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

Line Item Description Variable Fixed

Cost of goods sold $70\%30\%$

Selling expenses $75\%25\%$

Administrative expenses $50\%50\%$

Management is considering a plant expansion program for the following year that will permit an increase of $$11,220,000$ in yearly sales. The expansion will increase fixed costs by $$3,000,000$ but will not affect the relationship between sales and variable costs.