Determine the amount of sales (units) that would be necessary under Break-Even S

Question

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 78,300 units at a price of $135 per unit during the current year. Its income statement for the current year is as follows:

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

Management is considering a plant expansion program that will permit an increase of $810,000 in yearly sales. The expansion will increase fixed costs by $81,000, 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. Enter the final answers rounded to the nearest dollar.

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.

3. Compute the break-even sales (units) for the current year. Enter the final answers rounded to the nearest whole number.
units

4. Compute the break-even sales (units) under the proposed program. Enter the final answers rounded to the nearest whole number.
units

5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $130,500 of income from operations that was earned in the current year. Enter the final answers rounded to the nearest whole number.
units

6. Determine the maximum income from operations possible with the expanded plant. Enter the final answer rounded to the nearest dollar.
$

Sales $10,570,500 Cost of goods sold 5,220,000 Gross profit $5,350,500 Expenses: Selling expenses $2,610,000 Administrative expenses 2,610,000 Total expenses 5,220,000 Income from operations $130,500

Explanation / Answer

1.

2.

3. Break-even sales (units): 75498 units

Break-even sales (units) = Total fixed costs / Contribution margin per unit = $3523500/$46.67 = 75498.18

4. Break-even sales (units): 77234 units

Break-even sales (units) = Total fixed costs / Contribution margin per unit

Total fixed costs + $3523500 + $81000 = $3604500

Break-even sales (units) = $3604500/$46.67 = 77233.77 units

Note: Per Chegg guidelines, 4 sub-parts have been answered.

Total variable costs $6916500 Total fixed costs $3523500

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