Reference no: EM131208128
Break-Even Sales Under Present and Proposed Conditions Battonkill Company, operating at full capacity, sold 131,600 units at a price of $66 per unit during the current year. Its income statement for the current year is as follows: Sales $8,685,600 Cost of goods sold 3,080,000 Gross profit $5,605,600 Expenses: Selling expenses $1,540,000 Administrative expenses 924,000 Total expenses 2,464,000 Income from operations $3,141,600 The division of costs between fixed and variable is as follows: Fixed Variable Cost of goods sold 40% 60% Selling expenses 50% 50% Administrative expenses 70% 30% Management is considering a plant expansion program that will permit an increase of $792,000 in yearly sales. The expansion will increase fixed costs by $105,600, but will not affect the relationship between sales and variable costs.
Required:
1. Determine for the current year the total fixed costs and the total variable costs. Total fixed costs $ 2,648,800 Total variable costs $ 2,895,200 CORRECT!
2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year. Unit variable cost $ 22 Unit contribution margin $ 44 CORRECT!
3. Compute the break-even sales (units) for the current year. units
4. Compute the break-even sales (units) under the proposed program. units
5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $3,141,600 of income from operations that was earned in the current year. units
6. Determine the maximum income from operations possible with the expanded plant. $
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? $
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: Break-Even Sales Under Present and Proposed Conditions Battonkill Company, operating at full capacity, sold 131,600 units at a price of $66 per unit during the current year. Determine for the current year the total fixed costs and the total variable ..
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