Break-Even Sales Under Present and Proposed Conditions Battonkill Company, operating at full capacity, sold 103,400 units at a price of $57 per unit during the current year. Its income statement for the current year is as follows: Sales $5,893,800 COGS 2,090,000 Gross profit $3,803,800 Expenses: Selling expenses $1,045,000 Administrative expenses 627,000 Total expenses 1,672,000 Income from operations $2,131,800 The division of costs between fixed and variable is as follows: Fixed Variable COGS 40% 60% Selling expenses 50% 50% Adm. expenses 70% 30% Management is considering a plant expansion program that will permit an increase of $456,000 in yearly sales. The expansion will increase fixed costs by $60,800, but will not affect the relationship between sales and variable costs. Required: 1. Determine for the current year the total fixed costs and the total variable costs. Total fixed costs $ 1,797,400 Total variable costs $ 1,964,600 2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year. Unit variable cost $ 19 Unit contribution margin $ 38 3. Compute the break-even sales (units) for the current year. 47,300 units 4. Compute the break-even sales (units) under the proposed program. 48,900 units 5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $2,131,800 of income from operations that was earned in the current year. 105,000 units 6. Determine the maximum income from operations possible with the expanded plant. $ 105,210.52 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? $ 2,507,000 Income 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.