Break-Even Sales Under Present and Proposed Conditions Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $189 per unit during the current year. Its income statement is as follows: Sales $189,000,000 Cost of goods sold (99,000,000) Gross prot $90,000,000 Expenses: Selling expenses $16,000,000 Administrative expenses 15,400,000 Total expenses (31,400,000) Operating income $58,600,000 ) 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 $11,340,000 in yearly sales. The expansion will increase fixed costs by $3,500,000 but will not affect the relationship between sales and variable costs. Required: 1. Determine the total variable costs and the total xed costs for the current year. Total variable costs 2- 89,000,000 !/ Total xed costs 1.- 41,400,000 I 2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year. Unit variable cost if Unit contribution margin '- V/ 3. Compute the break-even sales (units) for the current year. 414,000 a! units 4. Compute the break-even sales (units) under the proposed program for the following year. | 449,000 J units 5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $58,600,000 of operating income that was earned in the current year. 1,035,000 a! units 6. Determine the maximum operating income possible with the expanded plant. -.- 60,100,000 X 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? i: ._. 8. Based on the data given, would you recommend accepting the proposal? . In favor of the proposal because of the reduction in break-even point. . In favor of the proposal because of the possibility of increasing income from operations. . In favor of the proposal because of the increase in break-even point. . Reject the proposal because if future sales remain at the current level, the income from operations will increase. . Reject the proposal because the sales necessary to maintain the current income from operations would be below the current year sales. (DDOCT!!! ' Choose the correct