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Bresk-Even Sale Under Present and Proposed Conditions Perlman Company, operating at full capacity, sold 1,000,000 units at a price of $189 par unit during the
Bresk-Even Sale Under Present and Proposed Conditions Perlman Company, operating at full capacity, sold 1,000,000 units at a price of $189 par unit during the current year. Its income statement is as follows: Sales $189,000,000 Cost of goodi solid (101,000,000) Gross profit S88,000,000 Expenses Selling experts 516,000,000 Administrative experts 12,600,000 Total expenses (28,600,000) Operating income $50,400.000 The divisional cost be variable and food as follows: Variable Cens of path said 30% Selling expenses 25 5046 50% expen Management is considering a plant expansion program for the following year that will pmit an increase of $13230,000 in yearly sales. The expansion will increase find costs by 3,500,000 but will not affect the relationship bet man sales and variables. Required: 1. Deline the total variables and the total sects for the current year. Total variable Total fixed costs 2. Demine (a) the unit variable cland (1) the ti contribution margin for the current year. Unit variable Unit contribution margin 3. Compute the beak-even als units for the current year. units 4. Computer the break-even als units) under the proposed program for the following year. unts 5. Dermine the amount of sales (unis) that would be necessary under the proposed program to realize the $50,400,000 of operating income that was earned in the current yet. unts 6. Dumine the maxima operating income possible with the expanded plant 7. If the proposal is accepted and sales man at the current vel, what wil the operating income or less before the following ya? Income 8. Based on the data given, would you recommand accepting the proposal? a. In favor of the proposal because of the reduction in break-even point. b. In favor of the proposal because of the possibility of increasing income from operations c. In favor of the proposal because of the increase in break-even point d. 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 operation would be below the currently sales Chordar
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