Break-Even Sales Under Present and Proposed Conditions Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $186 per unit during the current year. Its income statement is as follows: Sales Cost of goods sold Gross profit Expenses: Selling expenses $16,000,000 Administrative expenses 5,200,000 $186,000,000 (102,000,000) $84,000,000 Total expenses Operating income (21,200,000) $62,800,000 The division of costs between variable and fixed is as follows: Variable Fixed Cost of goods sold 70% 30% Selling expenses 75% 25% 50% 50% Administrative expenses Management is considering a plant expansion program for the following year that will permit an increase of $13,020,000 in yearly sales. The expansion will increase fixed costs by $4,000,000 but will not affect the relationship between sales and variable costs. Required: 1. Determine the total variable costs and the total fixed costs for the current year. Total variable costs 86,000,000 Total fixed costs x 2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year. Unit variable cost Unit contribution margin 86 100 3. Compute the break-even sales (units) for the current year. 38,200 x units 4. Compute the break-even sales (units) under the proposed program for the following year. 100 X units 5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $62,800,000 of operating income that was earned in the current year. units 6. Determine the maximum operating income possible with the expanded plant.