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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

  1. 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 81,000 units at a price of $72 per unit during the current year. Its income statement for the current year is as follows:

    Sales $5,832,000
    Cost of goods sold 2,880,000
    Gross profit $2,952,000
    Expenses:
    Selling expenses $1,440,000
    Administrative expenses 1,440,000
    Total expenses 2,880,000
    Income from operations $72,000

    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 $432,000 in yearly sales. The expansion will increase fixed costs by $43,200, but will not affect the relationship between sales and Costs that vary in total dollar amount as the level of activity changes.variable costs.

    Required:

    1. Determine the total variable costs and the Costs that tend to remain the same in amount, regardless of variations in the level of activity.total fixed costs for the current year. Enter the final answers rounded to the nearest dollar.

    Total variable costs $
    Total fixed costs $

    2. Determine (a) the unit variable cost and (b) the The dollars available from each unit of sales to cover fixed costs and provide operating profits.unit contribution margin for the current year. Enter the final answers rounded to two decimal places.

    Unit variable cost $
    Unit contribution margin $

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

    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. units

    5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $72,000 of income from operations that was earned in the current year. Enter the final answers rounded to the nearest whole number. units

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

    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. $

    • Income
    • Loss

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