Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capaoity, sold 172,900 units at a price of $75 per unit during the current year. Its income statement ise s follows: $12,967,500 Sales Cost of goods sold 4.600,000 Gross profit $8.367,500 Expenses Selling expenses 2,300,000 expenses 1,375,000 Tatal exnenses 3,675,000 $4,692,500 Income from operations The division of costs between variable and foxed 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 f the following year that will permit an increase of $1,200,000 in yearly sales. The expansion will increase fixed costs by $160,000, but will not affect the relationship between sales and variable costs. Required: 1. Determine f e total variable costs and the total fixxed costs for the current vear Total varisble costs Tetal fixed costs 2. Detemine (a) the unit variable cost and (b) the unit contribution margin for the current year Unit variable cost Unit contribution margim Compute the en sales funits) rthe current veas even sales funits) under the proposed program for the following vearn Compute the Determine t of sales (units) that would be necessary under e proposed program realize the $4,692,500 of income from operations that was earned in the current year units Determine the maximum income from operations possible with the expanded plant. el accepted and sales remain at the current level, what will the income or loss from operations for the following vear? If the proposal Income 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 Reiect the prnnoss heeause if huture sales remain at the curent 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 vear sales Choose the correct answer b v