Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 152,400 units at a price of $120 per unit during the

Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 152,400 units at a price of $120 per unit during the current year. Its income statement is as follows: Sales $18,288,000 Cost of goods sold 6,480,000 Gross profit $11,808,000 Expenses: Selling expenses $3,240,000 Administrative expenses 1,960,000 Total expenses 5,200,000 Income from operations $6,608,000 The division of costs between variable and fixed is as follows: Variable Fixed Cost of goods sold 60% 40% Selling expenses 50% 50% Administrative expenses 30% 70% Management is considering a plant expansion program for the following year that will permit an increase of $1,440,000 in yearly sales. The expansion will increase fixed costs by $192,000, 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 $6,608,000 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 7. 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 9

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