Reference no: EM131769952

Problem – Break-even sales under present and proposed conditions:

French Broad Inc., operating at full capacity, sold 25,125 units at a price of $75 per unit during 2008. Its income statement for 2008 is as follows:

Sales		$1,884,375
Cost of goods sold		1,100,000
Gross profit		$784,375
Expenses:
Selling expenses	$125,000
Administrative expenses	125,000
Total expenses		$250,000
Income from operations		$534,375

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

	Fixed	Variable
Cost of sales	40%	60%
Selling expenses	50%	50%
Administrative expenses	75%	25%

Management is considering a plant expansion program that will permit an increase of $487,500 in yearly sales. The expansion will increase fixed costs by $135,000, but will not affect the relationship between sales and variable costs.

Required –

1. Determine for 2008 the total fixed costs and total variable costs.

2. Determine for 2008 the unit variable cost and the unit contribution margin.