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:

Sales			$190,000,000
Cost of goods sold			(102,000,000)
Gross profit			$88,000,000
Expenses:
Selling expenses	$16,000,000
Administrative expenses	13,200,000
Total expenses			(29,200,000)
Operating income			$58,800,000

The division of costs between variable and fixed is as follows:

	Variable	Fixed
Cost of goods sold	70%		30%
Selling expenses	75%		25%
Administrative expenses	50%		50%

Management is considering a plant expansion program for the following year that will permit an increase of $9,500,000 in yearly sales. The expansion will increase fixed costs by $4,000,000 but will not affect the relationship between sales and variable costs.