Break$-$Even Sales Under Present and Proposed Conditions

Portmann Company, operating at full capacity, sold $1,000,000$ units at a price of $$186$ per unit during the current year. Its income statement is as follows:

Sales

Cost of goods sold

Gross profit

Expenses:

Selling expenses

$$14,000,000$

Administrative expenses $11,000,000$

Total expenses

Operating income

Operating income

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

affect the relationship between sales and variable costs.

Required:

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 break$-$even sales $($units$)$ for the current year.

units

$4.$ Compute the break$-$even sales $($units$)$ under the proposed program for the following year.

fill in the blank $6$

units

$5.$ Determine the amount of sales $($units$)$ that would be necessary under the proposed program to realize the $$61,000,000$ of operating income that was earned in the current year.

fill in the blank $7$

units

$6.$ Determine the maximum operating income possible with the expanded plant.

$fill in the blank $8$

$7.$ If the proposal is accepted and sales remain at the current level, what will the operating income or loss be for the following year?

$fill in the blank $9$

$8.$ Based on the data given, would you recommend accepting the proposal?

In favor of the proposal because of the reduction in break$-$even point.

In favor of the proposal because of the possibility of increasing income from operations.

In favor of the proposal because of the increase in break$-$even point.

Reject the proposal because if future sales remain at the current level, the income from operations will increase.

Reject the proposal because the sales necessary to maintain the current income from operations would be below the current year sales.

Choose the correct answer.