1. Break-Even Sales Under Present and Proposed Conditions

   Darby Company, operating at full capacity, sold 127,900 units at a price of $60 per unit during the current year. Its income statement is as follows:

   Sales			$7,674,000
   Cost of goods sold			2,720,000
   Gross profit			$4,954,000
   Expenses:
   Selling expenses	$1,360,000
   Administrative expenses	820,000
   Total expenses			2,180,000
   Income from operations			$2,774,000

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

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

   Management is considering a plant expansion program for the following year that will permit an increase of $600,000 in yearly sales. The expansion will increase fixed costs by $80,000, but will not affect the relationship between sales and variable costs.

   Required:

   1. Determine the total variable costs and the total fixed costs for the current year.

   Total variable costs	$________
   Total fixed costs	$________

   2. Determine (a) the unit variable cost and (b) the unit contribution margin for 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 $2,774,000 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? $ __________