Break$-$Even Sales Under Present and Proposed Conditions

Sales

Cost of goods sold

Gross profit

$$186,000,000$

$\frac{(102,000,000)}{?}$

$$84,000,000$

Expenses:

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

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

$$37,700,000$

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.

$x$ units

$x$ 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?

$$

$x$ Income $$

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.