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Determine the maximum operating income possible with the expanded plant with the following information: Kearney Company, operating at full capacity, sold 172,900 units at a
Determine the maximum operating income possible with the expanded plant with the following information: Kearney Company, operating at full capacity, sold 172,900 units at a price of $111 per unit during 20Y5. Its income statement for 20Y5 is as follows: Line Item Description Amount Sales $19,191,900 Cost of goods sold (6,808,000) Gross profit $12,383,900 Expenses: Selling expenses $3,404,000 Administrative expenses 2,035,000 Total expenses (5,439,000) Operating income $6,944,900 The division of costs between fixed and variable is as follows: Line Item Description Fixed Variable Cost of goods sold 40% 60% Selling expenses 50% 50% Administrative expenses 70% 30% Management is considering a plant expansion program that will permit an increase of $1,554,000 (14,000 units at $111 per unit) in yearly sales. The expansion will increase fixed costs by $207,200, but will not affect the relationship between sales and variable costs
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