Question
Determine the amount of sales (units) that would be necessary under Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold
Determine the amount of sales (units) that would be necessary under
Break-Even Sales Under Present and Proposed Conditions
Darby Company, operating at full capacity, sold 102,600 units at a price of $72 per unit during the current year. Its income statement for the current year is as follows:
Sales$7,387,200Cost of goods sold3,648,000Gross profit$3,739,200Expenses:Selling expenses$1,824,000Administrative expenses1,824,000Total expenses3,648,000Income from operations$91,200
The division of costs between fixed and variable is as follows:
VariableFixedCost of goods sold70%30%Selling expenses75%25%Administrative expenses50%50%
Management is considering a plant expansion program that will permit an increase of $576,000 in yearly sales. The expansion will increase fixed costs by $57,600, but will not affect the relationship between sales andvariable costs.
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