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			(100,000,000)
Gross profit			$89,000,000
Expenses:
Selling expenses	$16,000,000
Administrative expenses	14,000,000
Total expenses			(30,000,000)
Operating income			$59,000,000

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 $9,450,000 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 fixed costs for the current year.

Total variable costs	$fill in the blank 1 Correct
Total fixed costs	$fill in the blank 2

2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year.

Unit variable cost	$fill in the blank 3
Unit contribution margin	$fill in the blank 4