Question
I need help with the steps to calculate problems 6 and 7 for the following scenerio: Determine the amount of sales (units) that would be
I need help with the steps to calculate problems 6 and 7 for the following scenerio:
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 126,900 units at a price of $54 per unit during the current year. Its income statement for the current year is as follows:
Sales | $6,852,600 | ||
Cost of goods sold | 3,384,000 | ||
Gross profit | $3,468,600 | ||
Expenses: | |||
Selling expenses | $1,692,000 | ||
Administrative expenses | 1,692,000 | ||
Total expenses | 3,384,000 | ||
Income from operations | $84,600 |
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 $594,000 in yearly sales. The expansion will increase fixed costs by $59,400, but will not affect the relationship between sales and variable costs.
Required:
1. Determine the total variable costs and the total fixed costs for the current year. Enter the final answers rounded to the nearest dollar.
Total variable costs | $4,483,800 |
Total fixed costs | $2,284,200 |
2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year. Enter the final answers rounded to two decimal places.
Unit variable cost | $35.33 |
Unit contribution margin | $18.67 |
3. Compute the break-even sales (units) for the current year. Enter the final answers rounded to the nearest whole number. 122,346 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. 125,528 units
5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $84,600 of
income from operations that was earned in the current year. Enter the final answers rounded to the nearest whole number.
130,059 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.
$
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