Break-Even Sales Under Present and Proposed ConditionsPortmann Company, operating at full capacity, sold 1,000,000 units at a price of $190 per unit during the current year. Its income statement is as follows:Sales$190,000,000Cost of goods sold(102,000,000)Gross profit$88,000,000Expenses:Selling expenses$15,000,000Administrative expenses 14,700,000Total expenses(29,700,000)Operating income$58,300,000The division of costs between variable and fixed is as follows:VariableFixedCost of goods sold70%30%Selling expenses75%25%Administrative50%50%expensesManagement is considering a plant expansion program for the following year that will permit an increase of $13,300,000 in yearly sales. The expansion will increase fixedcosts by $4,500,000 but will not affect the relationship between sales and variable costs.Required: 1. Determine the total variable costs and the total fixed costs for the current year.Total variable costs$Total fixed costs2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year.Unit variable costUnit contribution margin$43. Compute the break-even sales (units) for the current year.units4. Compute the break-even sales (units) under the proposed program for the following year.units5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $58,300,000 of operating income that was earned in thecurrent year.units6. Determine the maximum operating income possible with the expanded plant.$7. If the proposal is accepted and sales remain at the current level, what will the operating income or loss be for the following year?$

As per the guideline three subpart has been solved which are interlinked. Variable cost is the cost that changed with the level of production. Fixed costs remain constant and no change due to changes in the level of output 1. The Variable cost and fixed cost during the current year Variable Cost = 83385000 Fixed cost = 35085000 2. unit variable cost and unit contribution margin for the year 3. The Beak Even sale is calculated by dividing Fixed cost by contribution margin per unit = Fixed cost / Contribution margin per unit = 35085000 / 106.615 =329082 units

Business

Accounting

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. units

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. units

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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