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 (98,000,000) Gross prot $92,000,000 Expenses: Selling expenses $16,000,000 Administrative expenses 18,800,000 Total expenses (34,800,000) Operating income $57,200,000 The division of costs between variable and xed is as follows: Variable Fixed Cost of goods sold 70% 30% Selling expenses 75% 25% Administrative 50% 50% expenses Management is considering a plant expansion program for the following year that will permit an increase of $11,400,000 in yearly sales. The expansion will increase fixed costs by $3,000,000 but will not affect the relationship between sales and variable costs. 1. Determine the total variable costs and the total xed costs for the current year. Total variable costs 2- 90,000,000 V Total xed costs -.- 42,800,000 J 2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year. Unit variable cost J Unit contribution margin 1/ 3. Compute the break-even sales (units) for the current year. > 4. Compute the break-even sales (units) under the proposed program for the following year. 458,000 4 units 5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $57,200,000 of operating income that was earned in the current year. 6. Determine the maximum operating income possible with the expanded piant. Q X 7. If the proposal is accepted and sales remain at the current ievel, what will the operating income or loss be for the following year? m)