Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 97,700 units at a price of $93 per unit during the current year. Its income statement is as follows Sales$9,086,100Cost of goods sold3,224,000Gross profit$5,862,100Expenses:Selling expenses$1,612,000Administrative expenses961,000Total expenses2,573,000Income from operations$3,289,100 The division of costs between variable and fixed is as follows: VariableFixedCost of goods sold60%40%Selling expenses50%50%Administrative expenses30%70% Management is considering a plant expansion program for the following year that will permit an increase of $744,000 in yearly sales. The expansion will increase fixed costs by $99,200, but will not affect the relationship between sales andvariable costs. Required: 1. Determine the total variable costs and the totalfixed costsfor the current year. Total variable costs$Total fixed costs$ 2. Determine (a) the unit variable cost and (b) theunit contribution marginfor the current year. Unit variable cost$Unit contribution margin$ 3. Compute the break-even sales (units) for the current year. units 4. Compute the break-even sales (units) under the proposed program for the following year. units 5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $3,289,100 of income from operations that was earned in the current year. units 6. Determine the maximum income from operations possible with the expanded plant. $ 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? $ 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.