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Question: Determine the amount of sales (units) that would be necessary under the proposed program to realize the $61,200,000 of operating income that was earned

Question: Determine the amount of sales (units) that would be necessary under the proposed program to realize the $61,200,000 of operating income that was earned in the current year.

Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $186 per unit during the current year. Its income statement is as follows:

Sales $186,000,000
Cost of goods sold (98,000,000)
Gross profit $88,000,000
Expenses:
Selling expenses $16,000,000
Administrative expenses 10,800,000
Total expenses (26,800,000)
Operating income $61,200,000

The division of costs between variable and fixed 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 for the following year that will permit an increase of $13,020,000 in yearly sales. The expansion will increase fixed costs by $5,000,000 but will not affect the relationship between sales and variable costs.

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