Darby Company, operating at full capacity, sold 90,450 units at a price of $48 per unit during the current year. Its income statement for the current year is as follows: Sales     $4,341,600 Cost of goods sold     2,144,000 Gross profit     $2,197,600 Expenses:       Selling expenses $1,072,000     Administrative expenses 1,072,000     Total expenses     2,144,000 Income from operations     $53,600 The division of costs between fixed and variable is as follows:   Variable Fixed Cost of goods sold 70%   30%   Selling expenses 75%   25%   Administrative expenses 50%   50%   Management is considering a plant expansion program that will permit an increase of $384,000 in yearly sales. The expansion will increase fixed costs by $38,400, 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. Total variable costs $ Total fixed costs $ 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. Unit variable cost $ Unit contribution margin $ 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 for the following year. 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 $53,600 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. $ 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? Enter the final answer rounded to the nearest dollar.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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 90,450 units at a price of $48 per unit during the current year. Its income statement for the current year is as follows:

Sales     $4,341,600
Cost of goods sold     2,144,000
Gross profit     $2,197,600
Expenses:      
Selling expenses $1,072,000    
Administrative expenses 1,072,000    
Total expenses     2,144,000
Income from operations     $53,600

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

  Variable Fixed
Cost of goods sold 70%   30%  
Selling expenses 75%   25%  
Administrative expenses 50%   50%  

Management is considering a plant expansion program that will permit an increase of $384,000 in yearly sales. The expansion will increase fixed costs by $38,400, 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.

Total variable costs $
Total fixed costs $

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.

Unit variable cost $
Unit contribution margin $

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 for the following year. 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 $53,600 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.
$

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? Enter the final answer rounded to the nearest dollar.

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