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Break-Even Sales Under Present and Proposed Conditions Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $190 per unit during the
Break-Even Sales Under Present and Proposed Conditions Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $190 per unit during the current year. Its income statement is as follows: The division of costs between variable and fixed is as follows: Management is considering a plant expansion program for the following year that will permit an increase of $9,500,000 in yearly sales. The expansio will increase fixed costs by $4,000,000 but will not affect the relationship between sales and variable costs. 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 $57,400,000 of operating income that was earned in the current year. units 6. Determine the maximum operating income possible with the expanded plant. $ 7. If the proposal is accepted and sales remain at the current level, what will the operating income or loss be for the following year
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