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Break-Even Sales Under Present and Proposed Conditions Kearney Company, operating at full capacity, sold 150,400 units at a price of $111 per unit during 20Y5. Its income statement for 20YS is as fol lows: Sales $16,694,400 Cost of goods (5,920,000) sold Gross profit $10,774,400 Expenses: Selling $2,960,000 expenses Administrative 1.776,000 expenses Total (4,736,000) expenses Income from operations $6,038,400 The division of costs between fixed and variable is as follows: Fixed Variable Cost of good sold 40% 60% Selling expenses 50% 50% Administrative expenses 70% 30% Management is cansidering a plant expansion pragram that will permit an increase of $1,332,000 (12,000 units at $111 per unit) in yearly sales. The expansion will increase fixed costs by $177,600, but will not affect the relationship between sales and variable costs. Instructions: 1. Determine for 20YS the total fixed costs and the total variable costs Tatal fixed costs Total variable costs 2. Determine for 20Y5 (a) the unit variable cost and (b) the unit contribution margin. per a. Unit variable cost unit b. Unit contribution per margin unit 3. Compute the break-even sales (units) for 20Y5. units 4. Compute the break-even sales (units) under the proposed program units 5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $6,038,400 of income from operations that was eamed in 20Y5. units 6. Determine the maximum operating income possible with the expanded plant. 7. If the proposal is accepted and sales remain at the 20Y5 level, what will be the operating income or loss for 20Y6? $ 8. Assuming a lack of market research, disadvantages for expanding the plant include all of the following except: a. The break-even point increases. b. The sales necessary to maintain the current income from operations must increase in excess of 20Y5 sales. c. If future sales remain at the 20Y5 level, the income from operations will decline. d. The maximum income from operations possible with the expanded plant is less than the current income from operations