Question
Darby Company, operating at full capacity, sold 93,150 units at a price of $84 per unit during the current year. Its income statement for the
Darby Company, operating at full capacity, sold 93,150 units at a price of $84 per unit during the current year. Its income statement for the current year is as follows:
Sales $7,824,600
Cost of goods sold 3,864,000
Gross profit $3,960,600
Expenses: Selling expenses $1,932,000
Administrative expenses 1,932,000
Total expenses 3,864,000
Income from operations $96,600
The division of costs between fixed and variable is as follows: Variable Fixed
Cost of goods sold Variable 70% Fixed 30%
Selling expenses Variable 75% Fixed 25%
Administrative expenses Variable 50% Fixed 50%
Management is considering a plant expansion program that will permit an increase of $672,000 in yearly sales. The expansion will increase fixed costs by $67,200, but will not affect the relationship between sales and variable costs.
Determine the maximum income from operations possible with the expanded plant. Enter the final answer rounded to the nearest dollar. (I HAVE ASKED THIS QUESTION ALREADY BUT I RECEIVED THE WRONG ANSWER)
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