1.
Break-even Point: It refers to a point in the level of operations at which a company experiences its revenues generated is equal to its costs incurred. Thus, when a company reaches at its break-even point, it reports neither an income nor a loss from operations. The formula to calculate the break-even point in sales units is as follows:
the total fixed costs and the total variable costs for the current year.
2(A)
the unit variable cost for the current year.
3.
To compute: the break-even sales (units) for the current year.
4.
To compute: the break-even sales (units) under the proposed program for the following year.
5.
the amount of sales (units) if the company desires a target profit of $692,500.
6.
the maximum income from operations possible with the expanded plant.
7.
the income or loss from operations for the following year if the proposal is accepted and the sales remains same.
8.
To explain: whether to recommend for accepting the proposal.
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Chapter 19 Solutions
Financial & Managerial Accounting
- Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 114,800 units at a price of $108 per unit during the current year. Its income statement is as follows: Sales $12,398,400 Cost of goods sold 4,392,000 Gross profit $8,006,400 Expenses: Selling expenses $2,196,000 Administrative expenses 1,332,000 Total expenses 3,528,000 Income from operations $4,478,400 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 $972,000 in yearly sales. The expansion will increase fixed costs by $129,600, but will not affect the relationship between sales and variable costs. 4. Compute the break-even sales (units) under the proposed program for the following…arrow_forwardBreak-even sales under present and proposed conditions Howard Industries Inc., operating at full capacity, sold 64,000 units at a price of $45 per unit during the current year. Its income statement is as follows: Line Item Description Amount Amount Sales $2,880,000 Cost of goods sold (1,400,000) Gross profit $1,480,000 Expenses: Selling expenses $400,000 Administrative expenses 387,500 Total expenses (787,500) Operating income $692,500 The division of costs between variable and fixed is as follows: Line Item Description Variable Fixed Cost of goods sold 75% 25% Selling expenses 60% 40% Administrative expenses 80% 20% Management is considering a plant expansion program for the following year that will permit an increase of $900,000 in yearly sales. The expansion will increase fixed costs by $212,500 but will not affect the relationship between sales and variable costs. Required: 6. Determine the maximum operating…arrow_forwardBreak-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 143,000 units at a price of $102 per unit during the current year. Its income statement is as follows: Sales $14,586,000 Cost of goods sold 5,168,000 Gross profit $9,418,000 Expenses: Selling expenses $2,584,000 Administrative expenses 1,564,000 Total expenses 4,148,000 Income from operations $5,270,000 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 $1,326,000 in yearly sales. The expansion will increase fixed costs by $176,800, 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…arrow_forward
- Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 103,400 units at a price of $120 per unit during the current year. Its income statement is as follows: Sales $12,408,000 Cost of goods sold 4,400,000 Gross profit $8,008,000 Expenses: Selling expenses $2,200,000 Administrative expenses 1,320,000 Total expenses 3,520,000 Income from operations $4,488,000 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 $960,000 in yearly sales. The expansion will increase fixed costs by $128,000, 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…arrow_forwardBreak-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 143,000 units at a price of $111 per unit during the current year. Its income statement is as follows: Sales Cost of goods sold $15,873,000 5,624,000 Gross profit Expenses: Selling expenses $2,812,000 Administrative expenses 1,702,000 Total expenses $10,249,000 4,514,000 $5,735,000 Income from operations The division of costs between variable and fixed is as follows: Variable Fixed Cost of goods sold 60% 40% Selling expenses 50% 50% Administrative 30% 70% expenses Management is considering a plant expansion program for the following year that will permit an increase of $1,443,000 in yearly sales. The expansion will increase fixed costs by $192,400, but will not affect the relationship between sales and variable costs. Required: 5. Determine the amount of sales (units) that would be 1. Determine the total variable costs and the total fixed costs for the current ye that was earned in…arrow_forwardBreak-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 161,800 units at a price of $132 per unit during the current year. Its income statement is as follows: Sales $21,357,600 Cost of goods sold 7,568,000 Gross profit $13,789,600 Expenses: Selling expenses $3,784,000 Administrative expenses 2,288,000 Total expenses 6,072,000 Income from operations $7,717,600 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 $1,980,000 in yearly sales. The expansion will increase fixed costs by $264,000, 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…arrow_forward
- Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 169,200 units at a price of $90 per unit during the current year. Its income statement is as follows: Sales $15,228,000 Cost of goods sold 5,400,000 Gross profit $9,828,000 Expenses: Selling expenses $2,700,000 Administrative expenses 1,620,000 Total expenses 4,320,000 Income from operations $5,508,000 The division of costs between variable and fixed is as follows: Variable Fixed Cost of goods sold 60% 40% Selling expenses 50% 50% Administrative 30% 70% expenses Management is considering a plant expansion program for the following year that will permit an increase of $1,350,000 in yearly sales. The expansion will increase fixed costs by $180,000, 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 costs 2. Determine (a) the unit variable…arrow_forwardBreak-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 139,000 units at a price of $90 per unit during the current year. Its income statement is as follows: Sales $12,510,000 Cost of goods sold 4,440,000 Gross profit $8,070,000 Expenses: Selling expenses $2,220,000 Administrative expenses 1,320,000 Total expenses 3,540,000 Income from operations $4,530,000 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 $1,170,000 in yearly sales. The expansion will increase fixed costs by $156,000, 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…arrow_forwardBreak-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 150,400 units at a price of $123 per unit during the current year. Its income statement is as follows: Sales $18,499,200 Cost of goods sold 6,560,000 Gross profit $11,939,200 Expenses: Selling expenses $3,280,000 Administrative expenses 1,968,000 Total expenses 5,248,000 Income from operations $6,691,200 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 $1,722,000 in yearly sales. The expansion will increase fixed costs by $229,600, but will not affect the relationship between sales and…arrow_forward
- Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 118,500 units at a price of $75 per unit during the current year. Its income statement is as follows: Sales $8,887,500 Cost of goods sold 3,150,000 Gross profit $5,737,500 Expenses: Selling expenses $1,575,000 Administrative expenses 950,000 Total expenses 2,525,000 Income from operations $3,212,500 The division of costs between variable and fixed is as follows: Variable Fixed Cost of goods sold 60% 40% Selling expenses 50% 50% Administrative 70% 30% expenses Management is considering a plant expansion program for the following year that will permit an increase of $825,000 in yearly sales. The expansion will increase fixec costs by $110,000, 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 costs MacBook Pro DII FBarrow_forwardBreak-Even Sales Under Present and Proposed Conditions Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $188 per unit during the current year. Its income statement is as follows: Sales Cost of goods sold Gross profit Expenses: $188,000,000 (102,000,000) $86,000,000 Selling expenses $14,000,000 Administrative expenses 12,200,000 Total expenses Operating income (26,200,000) $59,800,000 The division of costs between variable and fixed is as follows: Cost of goods sold Variable Fixed 70% 30% 75% 25% Selling expenses Administrative expenses 50% 50% Management is considering a plant expansion program for the following year that will permit an increase of $11,280,000 in yearly sales. The expansion will increase fixed costs by $4,000,000 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 costs 2. Determine (a) the…arrow_forwardBreak-Even Sales Under Present and Proposed Conditions Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $188 per unit during the current year. Its income statement is as follows: Sales Cost of goods sold Gross profit Expenses: $188,000,000 (98,000,000) $90,000,000 Selling expenses $16,000,000 Administrative expenses 14,800,000 Total expenses Operating income (30,800,000) $59,200,000 The division of costs between variable and fixed is as follows: Cost of goods sold Variable Fixed 70% 30% 75% 25% Selling expenses Administrative expenses 50% 50% Management is considering a plant expansion program for the following year that will permit an increase of $11,280,000 in yearly sales. The expansion will increase fixed costs 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 88,000,000 Total fixed costs 40,800,000…arrow_forward
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