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$190,000,000Cost of goods sold(102,000,000)Gross profit$88,000,000Expenses:Selling expenses$14,000,000Administrative expenses16,200,000Total expenses(30,200,000)Operating income$57,800,000

The division of costs betweenvariableandfixedis as follows:

VariableFixedCost of goods sold70%30%Selling expenses75%25%Administrative expenses50%50%

1.Determine the total variable costs and the total fixed costs for the current year.

Total variable costs$__________

Total fixed costs$_________

2.Determine (a) the unit variable cost and (b) theunit contribution marginfor the current year.

Unit variable cost$_________

Unit contribution margin$___________

3.Compute the break-even sales (units) for the current year.

______________units

4.Compute the break-even sales (units) under the proposed program for the following year.

________________units

5.Determine the amount of sales (units) that would be necessary under the proposed program to realize the $57,800,000 of operating income that was earned in the current year.

____________units

6.Determine the maximum operating income possible with the expanded plant.

$____________

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?

$________________