Break-Even Sales Under Present and Proposed Conditions Kearney Company, operating at full capacity, sold 110,800 units at a price of $63 per unit during 20YS. Its income statement for 20YS is as follows: Sales Cost of goods sold Gross profit Expenses: $6,980,400 (2,478,000) $4,502,400 Selling expenses Administrative expenses Total expenses $1,239,000 735,000 (1,974,000) Income from operations $2,528,400 The division of costs between fixed and variable is as follows Fixed Variable Cost of good sold Selling expenses 50% Administrative expenses 70% 40% 60% 50% 30% Management is considering a plant expansion program that will permit an increase of $630,000 (10,000 units at $63 per unit) in yearly sales. The expansion will increase fixed costs by $84,000, but will not affect the relationship between sales and variable costs. Instructions: 1. Determine for 20Y5 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) that would be necessary under the proposed program to realize the $2,528,400 of income from operations that was earned in 20YS. units 6. Determine the maximum operating income possible with the expanded plant. 7. If the proposal is accepted and sales remain at the 20YS level, what will be the operating income or loss for 20Y6? 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 20YS sales. c. If future sales remain at the 20YS 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