Break$-$Even Sales Under Present and Proposed Conditions

Portmann Company, operating at full capacity, sold $1,000,000$ units at a price of $$190$ per unit during the current year. Its income statement is as follows:

Required:

Determine the total variable costs and the total fixed costs for the current year.

Total variable costs

Total fixed costs

$4$

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

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

units

units

Determine the maximum operating income possible with the expanded plant.

$

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

$

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

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

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

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

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

e$.$ 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.