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 Cost of goods sold Gross profit Expenses: $2,880,000 (1,400,000) $1,480,000 Selling expenses $400,000 Administrative expenses 387,500 Total expenses (787,500) $692,500 Operating income The division of costs between variable and fixed is as follows: Variable Fixed Cost of goods sold 75% 25% Selling expenses 60% 40% Administrative expenses 80% 20% 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. Required: 1. Determine the total fixed costs and the total variable costs for the current year. Total variable costs S S 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