Break-Even Sales Under Present and Proposed Conditions
A e .1 CengageNOWvZIOnline teachi' X H Course Hero X I D [:II) MyCollectionsStationSPPz X I + X G E] https://v2.cengagenow.com/ilrn/ta keAssignment/takeAsslgnmentMaln.do?invoker:BuakeAssignmentSessionLocator:&inprogress:false Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 122,200 units at a price of $90 per unit during the current year. Its income statement is as follows: Sales $10,990,000 Cost of goods sold 3,900,000 Gross prot $7,098,000 Expenses: Selling expenses $1,950,000 Administrative expenses 1,170,000 Total expenses 3,120,000 Income from operations $3,978,000 The division of costs between variable and fixed is as follows: Variable Fixed Cost of goods sold 60% 40% Selling expenses 50% 50% Administrative 30% 70% expenses Management is considering a plant expansion program for the following year that will permit an increase of $900,000 in yearly sales. The expansion will increase xed costs by $120,000, but will not affect the relationship between sales and variable costs. Required: ( Previous Next ) v _ 8:21 PM . ' '7 t '- ,0 Type here to search 1 017,202: F23 D J {.4 CengageNOWvZ|On|ineteachiv X [I Course Hero X I D [:II) MyCollectioniStationsiPz X I + X G G E] https://v2.cengagenow.com/i|rn/takeAssignment/takeAsslgnmentMeln.do?invoker:SnakeAssignmentSessionLocator:&inprogress:false G. g - - Required: A (Ti 1. Determine the total variable costs and the total xed costs for the current year. (D Total variable costs 35:] Total xed costs $[:] 2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year. 3. Compute the break-even sales (units) for the current year. Unit variable cost Unit contribution margin 4. Compute the break-even sales (units) under the proposed program for the following year. 5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $3,978,000 of income from operations that was earned in the current yeah 6. Determine the maximum income from operations possible with the expanded plant. $:l 7. If the proposal is accepted and sales remain at the current level, what will the income or loss from operations be for the following year? $:l' 8. Based on the data given, would you recommend accepting the proposal? a. In favor of the proposal because of the reduction in breakeven Doint. ' ( Previous Next ) v 7 8121 PM . 7 K, . - : E . ,0 Type here to search ' 85 ? _ $112021 F23 n: J .'4 CengageNOWvZIOnline teachiv X [I Course Hero X I D [:II) MyCollectionaStationSaPz X I + X 6 G E] https://v2.cengagenow.com/i|rn/takeAssignment/takeAssignmentMain.do?invoker:SnakeAssignrnentSessionLocator:&inprogress:false rll varia ecos A Unit contribution margin D 3. Compute the break-even sales (units) for the current year. 4. Compute the break-even sales (units) under the proposed program for the following year. 5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $3,978,000 of income from operations that was earned in the current yeah 6. Determine the maximum income from operations possible with the expanded plant. 94:] 7. If the proposal is accepted and sales remain at the current level, what will the income or loss from operations be for the following year? $:l' 8. Based on the data given, would you recommend accepting the proposal? a. In favor of the proposal because of the reduction in breakeven 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 breakeven point. :1. 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. P UneDrive 7 Screenshot saved Saturday, August 2021 1 PM ,0 Type here to search 8/7/2021
