Break-Even Sales Under Present and Proposed ConditionsDarby Company, operating at full capacity, sold 127,900 units at a price of $51 per unit during the current year. Its income statement is as follows:Sales $6,522,900Cost of goods sold 2,312,000Gross profit $4,210,900Expenses: Selling expenses$1,156,000 Administrative expenses697,000 Total expenses 1,853,000Income from operations $2,357,900The division of costs between variable and fixed is as follows: VariableFixedCost of goods sold60% 40% Selling expenses50% 50% Administrative expenses30% 70% Management is considering a plant expansion program for the following year that will permit an increase of $510,000 in yearly sales. The expansion will increase fixed costs by $68,000, but will not affect the relationship between sales and variable costs.Required:

Break Even Sales or Break Even level is the point at which the organisation doesn't earns any…

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Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter11: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 11.2.3P

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Break-Even Sales Under Present and Proposed Conditions

Darby Company, operating at full capacity, sold 127,900 units at a price of $51 per unit during the current year. Its income statement is as follows:

Sales		$6,522,900
Cost of goods sold		2,312,000
Gross profit		$4,210,900
Expenses:
Selling expenses	$1,156,000
Administrative expenses	697,000
Total expenses		1,853,000
Income from operations		$2,357,900

The division of costs between variable and fixed is as follows:

	Variable	Fixed
Cost of goods sold	60%		40%
Selling expenses	50%		50%
Administrative expenses	30%		70%

Management is considering a plant expansion program for the following year that will permit an increase of $510,000 in yearly sales. The expansion will increase fixed costs by $68,000, but will not affect the relationship between sales and variable costs.

Required:

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