Question
Break-Even Sales Under Present and Proposed Conditions Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $188 per unit during
Break-Even Sales Under Present and Proposed Conditions Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $188 per unit during the current year. Its income statement is as follows: Sales Cost of goods sold Gross profit $188,000,000 (102,000,000) $86,000,000 Expenses: Selling expenses $15,000,000 Administrative expenses 10,700,000 Total expenses (25,700,000) $60,300,000 Operating income The division of costs between variable and fixed is as follows: Cost of goods sold Variable Fixed 70% 30% 75% 25% Selling expenses Administrative expenses 50% 50% Management is considering a plant expansion program for the following year that will permit an increase of $13,160,000 in yearly sales. The expansion will increase fixed costs by $5,000,000 but will not affect the relationship between sales and variable costs. Required:
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