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BreakeEven Sales Under Present and Proposed Conditions Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $109 per unit during the
BreakeEven Sales Under Present and Proposed Conditions Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $109 per unit during the current year. Its income statement is as follows: Sales $189,000,000 Cost of goods so'd (99,000,000) Gross prot $90,000,000 Expenses: Se'ling expenses $16,000,000 Administrative expenses 15,400,000 Total expenses (31,400,000) Operating rncome $58 600,000 , The division of costs between variable and frxed is as follows: Variable Fixed Cost of goods so'd 70% 30% Selling expenses 75% 25% Administrative 50% 50% expenses Management is Considering a plant expansion program for the following year that wrll permit an increase of $9,450,000 in yearly sales. The expansion wiH rncrease xed costs by $4,000,000 but will not affect the rerationship between sales and variable costs. 5. Determine the amount of sales (units) that would be necessary under the proposed program to reaiize the $58,600,000 of operating income that was earned in the current year. 6. Detem'iine the maximum operating income possible with the expanded plant. -x
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