Break-Even Sales Under Present and Proposed Conditions Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $186 per unit during the current year. Its income statement is as follows: Sales Cost of goods sold Gross profit Expenses: Selling expenses Administrative expenses Total expenses $16,000,000 8,000,000 Cost of goods sold Selling expenses (24,000,000) Operating income $62,000,000 The division of costs between variable and fixed is as follows: Variable 70% 75% $186,000,000 (100,000,000) $86,000,000 50% Fixed 30% 25% Administrative expenses Management is considering a plant expansion program for the following year that will permit an increase of $13,020,000 in yearly sales. The expansion will increase fixed costs by $3,000,000 but will not affect the relationship between sales and variable costs. Required: 50%

Break-Even Sales Under Present and Proposed Conditions Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $186 per unit during the current year Its income statement is as follows: Sales $186,000,000$6,000,000(100,000,000) Cost of goods sold (100,000,000) Gross profit $86,000,000 Expenses: Selling expenses $16,000,000 Administrative expenses 8,000,000 Total expenses Operating income The division of costs between variable and fixed is as follows: Management is considering o plant expansion program for the following year that will permit an increase of $13,020,000 in yearly sales. The expansion will increase fixed costs by $3,000,000 but will not affect the relationship between sales and variable costs. Required: Required: 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) the unit contribution margin for 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 rea the current year. units 6. Determine the maximum operating income possible with the expanded plant. x