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 $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. Enter the final answers rounded to two decimal places. 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. Enter the final answers rounded to the nearest whole number.

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 108,000 units at a price of $66 per unit during the current year. Its income statement for the current year is as follows:

Sales     $7,128,000
Cost of goods sold     3,520,000
Gross profit     $3,608,000
Expenses:      
Selling expenses $1,760,000    
Administrative expenses 1,760,000    
Total expenses     3,520,000
Income from operations     $88,000

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 $594,000 in yearly sales. The expansion will increase fixed costs by $59,400, 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 $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. Enter the final answers rounded to two decimal places.

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. Enter the final answers rounded to the nearest whole number.
fill in the blank 5 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.
fill in the blank 6 units

5.  Determine the amount of sales (units) that would be necessary under the proposed program to realize the $88,000 of income from operations that was earned in the current year. Enter the final answers rounded to the nearest whole number.
fill in the blank 7 units

6.  Determine the maximum income from operations possible with the expanded plant. Enter the final answer rounded to the nearest dollar.
$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? Enter the final answer rounded to the nearest dollar.
$fill in the blank 9

 

 

 

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