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 94,500 units at a price of $135 per unit during the current year. Its income statement for the current year is as follows:

Sales

$12,757,500

Cost of goods sold

6,300,000

Gross profit

$6,457,500

Expenses:

Selling expenses

$3,150,000

Administrative expenses

3,150,000

Total expenses

6,300,000

Income from operations

$157,500

The division of costs between fixed and variable is as follows:

Variable

Fixed

Cost of goods sold

70%

30%

Selling expenses

75%

25%

Administrative expenses

50%

50%

Management is considering a plant expansion program that will permit an increase of $1,080,000 in yearly sales. The expansion will increase fixed costs by $108,000, but will not affect the relationship between sales andvariable costs.

Required:

1.Determine the total variable costs and thetotal fixed costsfor the current year. Enter the final answers rounded to the nearest dollar.

Total variable costs

$8,347,500 CORRECT

Total fixed costs

$ 4,252,500 CORRECT

2.Determine (a) the unit variable cost and (b) theunit contribution marginfor the current year. Enter the final answers rounded to two decimal places.

Unit variable cost

$ 88.33 CORRECT

Unit contribution margin

$ 46.67 CORRECT

3.Compute the break-even sales (units) for the current year. Enter the final answers rounded to the nearest whole number.

units91,118 CORRECT

4.Compute the break-even sales (units) under the proposed program for the following year. Enter the final answers rounded to the nearest whole number.

units93,433 CORRECT

5.Determine the amount of sales (units) that would be necessary under the proposed program to realize the $157,500 of income from operations that was earned in the current year. Enter the final answers rounded to the nearest whole number.

units 96,807 CORRECT

6.Determine the maximum income from operations possible with the expanded plant. Enter the final answer rounded to the nearest dollar.

$ HELP

7.If the proposal is accepted and sales remain at the current level, what will the income or loss from operations be for the following year? Enter the final answer rounded to the nearest dollar.

$ HELP

8.Based on the data given, would you recommend accepting the proposal?