Break-Even Sales Under Present and Proposed Conditions

Battonkill Company, operating at full capacity, sold 125,900 units at a price of $117 per unit during 2014. Its income statement for 2014 is as follows:

Sales			$14,730,300
Cost of goods sold			5,226,000
Gross profit			$9,504,300
Expenses:
Selling expenses	$2,613,000
Administrative expenses	1,560,000
Total expenses			4,173,000
Income from operations			$5,331,300

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

	Fixed		Variable
Cost of goods sold	40%		60%
Selling expenses	50%		50%
Administrative expenses	70%		30%

Management is considering a plant expansion program that will permit an increase of $1,287,000 in yearly sales. The expansion will increase fixed costs by $171,600, but will not affect the relationship between sales and variable costs.

Required:

1. Determine for 2014 the total fixed costs and the total variable costs.

Total fixed costs	$
Total variable costs	$

2. Determine for 2014 (a) the unit variable cost and (b) the unit contribution margin.

Unit variable cost	$
Unit contribution margin	$

3. Compute the break-even sales (units) for 2014.

units

4. Compute the break-even sales (units) under the proposed program.

units

5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $5,331,300 of income from operations that was earned in 2014.

units

6. Determine the maximum income from operations possible with the expanded plant. $

7. If the proposal is accepted and sales remain at the 2014 level, what will the income from operations be for 2015?

$