Required:1. Determine the total variable costs and the total fixed costs for the current year.Total variable costs86,000,000Total fixed costs39,400,0002. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year.Unit variable costUnit contribution margin1003. Compute the break-even sales (units) for the current year.394,000 units4. Compute the break-even sales (units) under the proposed program for the following year.X units5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $60,600,000 of operating income thatwas earned in the current year.Xunits6. 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?Income8. Based on the data given, would you recommend accepting the proposal?%24%24%24 Break-Even Sales Under Present and Proposed ConditionsPortmann Company, operating at full capacity, sold 1,000,000 units at a price of $186 per unit during the current year. Its income statement is asfollows:Sales$186,000,000Cost of goods sold(99,000,000)Gross profit$87,000,000Expenses:Selling expenses$14,000,000Administrative expenses 12,400,000Total expenses(26,400,000)$60,600,000Operating incomeThe division of costs between variable and fixed is as follows:VariableFixed70%30%Cost of goods sold75%25%Selling expensesAdministrative50%50%Management is considering a plant expansion program for the following year that will permit an increase of $11,160,009 in yearly sales. Theexpansion will increase fixed costs by $3,000,000 but will nor affect the relatiorship bet veen sales and variable costs,expensesNex

*As per Bartleby guideline, if questions are interlinked then only first three requested sub parts to be answered. 1. Unit variable cost= total variable cost/ Units sold = $86,000,000/1,000,000 = $86 per unit. 2. Break even units under proposed program. Proposed program will increase the fixed cost by 3,000,000 Revised fixed cost= $ 39,400,000+3,000,000 = $ 42,400,000 Break even units= Revised fixed cost/contribution per unit = $ 42,400,000/$100 =424000 units3. Units to be sold for the required operating income= (revised fixed cost+ required operating income)/ Contribution per unit. = (42,400,000+60,600,000)/$100 = 1030000 units

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2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year. Unit variable cost Unit contribution margin 100 3. Compute the break-even sales (units) for the current year. 394,000 units 4. Compute the break-even sales (units) under the proposed program for the following year. X units 5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $60,600,000 of operating income that was earned in the current year. X units

2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year. Unit variable cost Unit contribution margin 100 3. Compute the break-even sales (units) for the current year. 394,000 units 4. Compute the break-even sales (units) under the proposed program for the following year. X units 5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $60,600,000 of operating income that was earned in the current year. X 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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Question

Required:
1. Determine the total variable costs and the total fixed costs for the current year.
Total variable costs
86,000,000
Total fixed costs
39,400,000
2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year.
Unit variable cost
Unit contribution margin
100
3. Compute the break-even sales (units) for the current year.
394,000 units
4. Compute the break-even sales (units) under the proposed program for the following year.
X units
5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $60,600,000 of operating income that
was earned in the current year.
Xunits
6. 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?
Income
8. Based on the data given, would you recommend accepting the proposal?
%24
%24
%24

Break-Even Sales Under Present and Proposed Conditions
Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $186 per unit during the current year. Its income statement is as
follows:
Sales
$186,000,000
Cost of goods sold
(99,000,000)
Gross profit
$87,000,000
Expenses:
Selling expenses
$14,000,000
Administrative expenses 12,400,000
Total expenses
(26,400,000)
$60,600,000
Operating income
The division of costs between variable and fixed is as follows:
Variable
Fixed
70%
30%
Cost of goods sold
75%
25%
Selling expenses
Administrative
50%
50%
Management is considering a plant expansion program for the following year that will permit an increase of $11,160,009 in yearly sales. The
expansion will increase fixed costs by $3,000,000 but will nor affect the relatiorship bet veen sales and variable costs,
expenses
Nex

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