Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 129,600 units at a price of $63 per unit during the current year. Its income statement is as follows: Sales $8,164,800 Cost of goods sold 2,898,000 Gross profit $5,266,800 Expenses: Selling expenses $1,449,000 Administrative expenses 861,000 Total expenses 2,310,000 Income from operations $2,956,800 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 $630,000 in yearly sales. The expansion will increase fixed costs by $84,000, 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. Total variable costs $fill in the blank 1 Total fixed costs $fill in the blank 2 2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year. Unit variable cost $fill in the blank 3 Unit contribution margin $fill in the blank 4 3. Compute the break-even sales (units) for the current year. fill in the blank 5 units 4. Compute the break-even sales (units) under the proposed program for the following year. fill in the blank 6 units 5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $2,956,800 of income from operations that was earned in the current year. fill in the blank 7 units 6. Determine the maximum income from operations possible with the expanded plant. $fill in the blank 8
Please help with questions 4 thru 8 please
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Break-Even Sales Under Present and Proposed Conditions
Darby Company, operating at full capacity, sold 129,600 units at a price of $63 per unit during the current year. Its income statement is as follows:
Sales $8,164,800 Cost of goods sold 2,898,000 Gross profit $5,266,800 Expenses: Selling expenses $1,449,000 Administrative expenses 861,000 Total expenses 2,310,000 Income from operations $2,956,800 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 $630,000 in yearly sales. The expansion will increase fixed costs by $84,000, 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.
Total variable costs $fill in the blank 1 Total fixed costs $fill in the blank 2 2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year.
Unit variable cost $fill in the blank 3 Unit contribution margin $fill in the blank 4 3. Compute the break-even sales (units) for the current year.
fill in the blank 5 units4. Compute the break-even sales (units) under the proposed program for the following year.
fill in the blank 6 units5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $2,956,800 of income from operations that was earned in the current year.
fill in the blank 7 units6. Determine the maximum income from operations possible with the expanded plant.
$fill in the blank 87. 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?
$fill in the blank 98. Based on the data given, would you recommend accepting the proposal?
- In favor of the proposal because of the reduction in break-even point.
- In favor of the proposal because of the possibility of increasing income from operations.
- In favor of the proposal because of the increase in break-even point.
- Reject the proposal because if future sales remain at the current level, the income from operations will increase.
- Reject the proposal because the sales necessary to maintain the current income from operations would be below the current year sales.
Choose the correct answer.
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