Break-Even Sales Under Present and Proposed Conditions Howard Industries Inc., operating at full capacity, sold 64,000 units at a price of $45 per unit during the current year. Its income statement is as follows: Sales $2,880,000 1,400,000 Cost of goods sold Gross profit $1,480,000 Expenses: $400,000 Selling expenses 387,500 Administrative expenses 787,500 Total expenses $692,500 Income from operations The division of costs between variable and fixed is as follows: Fixed Variable 25% 75% Cost of goods sold 40% 60% Selling expenses 20 % Administrative 80% expenses Management is considering a plant expansion program for the following year that will permit an increase of $900,000 in yearly sales. The expansion will increase fixed costs by $212,500 but will not affect the relationship between sales and variable costs. Donulends 5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $692,500 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?