Break-Even Sales Under Present and Proposed Conditions Kearney Company, operating at full capacity, sold 131,600 units at a price of $135 per unit during 20YS. Its income statement for 20YS is as follows: Sales Cost of goods sold Gross profit Expenses: $17,766,000 (6,300,000) $11,466,000 Selling expenses Administrative expenses Total expenses $3,150,000 1,890,000 (5,040,000) Income from operations $6,426,000 The division of costs between fixed and variable is as follows Cost of good sold Selling expenses Administrative expenses 70% Fixed 40% 50% Variable 60% 50% 30% Management is considering a plant expansion program that will permit an increase of $1,485,000 (11,000 units at $135 per unit) in yearly sales. The expansi will increase fixed costs by $198,000, but will not affect the relationship between sales and variable costs. Instructions: 1. Determine for 20YS the total fixed costs and the total variable costs. Total fixed costs Total variable costs 2. Determine for 20YS (a) the unit variable cost and (b) the unit contribution margin. a. Unit variable cost b. Unit contribution margin 3. Compute the break-even sales (units) for 20YS per unit per unit units 4. Compute the break-even sales (units) under the proposed program units 5. Determine the amount of sales (units) tha earned in 20Y5 t would be necessary under the proposed program to realize the $6,426,000 of income from operations that was units 6. Determine the maximum operating income possible with the expanded plant 7. If the proposal is accepted and sales remain at the 20Y5 level, what will be the operating income or loss for 20Y6? Income 8. Assuming a lack of market research, disadvantages for expanding the plant include all of the following except: a. The break-even point increases. b. The sales necessary to maintain the current income from operations must increase in excess of 20Y5 sales. c. If future sales remain at the 20Y5 level, the income from operations will decline. d. The maximum income from operations possible with the expanded plant is less than the current income from operations