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Break-even sales under present and proposed conditions Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $188 per unit during the
Break-even sales under present and proposed conditions Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $188 per unit during the current year. Its income statement is as follows: The division of costs between variable and fixed is as follows: Manapement is considering a plont expandion program for the following year that will permit an increase of 513,160,000 in yearly sales. The expansion wit increase fxed costs by 14,300,000 but will not affect the relationship between sales and variable costs. Required 1. Determine the total wariable costs and the total fixed costs for the current year. Total variable costs Total fixed costs 4 2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current yean. Unit variable cost $ 1. Determine the totol variable costs and the total fixed costs for the current yean Total variable costs 4 Total fixed costs 1 2. Determine (b) the unit variable cost and (b) the unit contributien margin for the current year. Unit variable cost s Unit contribution margins 3. Compute the break-even sales (units) for the current year. units 4. Compute the broak-even soles (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 $55,700,000 of operating income that was earned in the current yeac. unis 6. Determine the maximum operating income posslble with the expanded plant. 7. If the proposal is accepted and sales rempin at the cuirrent level, what wit tho operating income or loss be for the following year? 8. Based on the data given, would you recommend accepting the proposal? a. In tovor of the proposal bechuse of the reduction in break-even point. b. In fovar of the preposal because of the possibulity of incressing inceme frem eptrations. c. In fivor of the proposel because of the increase in break-even point. d. Reject the proposal because & future sales remain at the cuirent level, the income from operations will increase. e. Reject the proposal because the sales necessary to maintain the current income from operations would be below the current year sales
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