Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 169,200 units at a price of $90 per unit during the current year. Its income statement is as follows: Sales $15,228,000 Cost of goods sold 5,400,000 Gross profit $9,828,000 Expenses: Selling expenses $2,700,000 Administrative expenses 1,620,000 Total expenses 4,320,000 Income from operations $5,508,000 The division of costs between variable and fixed is as follows: Variable Fixed Cost of goods sold 60% 40% Selling expenses 50% 50% Administrative 30% 70% expenses Management is considering a plant expansion program for the following year that will permit an increase of $1,350,000 in yearly sales. The expansion will increase fixed costs by $180,000, 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 Total fixed costs 2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year. Unit variable cost Unit contribution margin 3. Compute the break-even sales (units) for the current year.

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Break-Even Sales Under Present and Proposed Conditions
Darby Company, operating at full capacity, sold 169,200 units at a price of $90 per unit during the current year. Its income statement is as follows:
Sales
$15,228,000
Cost of goods sold
5,400,000
Gross profit
$9,828,000
Expenses:
Selling expenses
$2,700,000
Administrative expenses 1,620,000
Total expenses
4,320,000
Income from operations
$5,508,000
The division of costs between variable and fixed is as follows:
Variable
Fixed
Cost of goods sold
60%
40%
Selling expenses
50%
50%
Administrative
30%
70%
expenses
Management is considering a plant expansion program for the following year that will permit an increase of $1,350,000 in yearly sales. The expansion will increase fixed costs by $180,000, 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
Total fixed costs
2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year.
Unit variable cost
Unit contribution margin
3. Compute the break-even sales (units) for the current year.
Expand
Transcribed Image Text

Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 169,200 units at a price of $90 per unit during the current year. Its income statement is as follows: Sales $15,228,000 Cost of goods sold 5,400,000 Gross profit $9,828,000 Expenses: Selling expenses $2,700,000 Administrative expenses 1,620,000 Total expenses 4,320,000 Income from operations $5,508,000 The division of costs between variable and fixed is as follows: Variable Fixed Cost of goods sold 60% 40% Selling expenses 50% 50% Administrative 30% 70% expenses Management is considering a plant expansion program for the following year that will permit an increase of $1,350,000 in yearly sales. The expansion will increase fixed costs by $180,000, 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 Total fixed costs 2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year. Unit variable cost Unit contribution margin 3. Compute the break-even sales (units) for the current year.

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