Homework Help is Here – Start Your Trial Now!
Business
Accounting
50% 50% Administrative expenses 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 $[ Total fixed costs 2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year. Unit variable cost $ Unit contribution margin $ 3. Compute the break-even sales (units) for the current year. units

50% 50% Administrative expenses 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 $[ Total fixed costs 2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year. Unit variable cost $ Unit contribution margin $ 3. Compute the break-even sales (units) for the current year. units

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
Question
Please help
Selling expenses Administrative expenses 75% 50% 25% 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 $ Total fixed costs $ 2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year. Unit variable cost $ Unit contribution margin $ 3. Compute the break-even sales (units) for the current year. units 4. Compute the break-even sales (units) under the proposed program for the following year. units. 5. Determine the amount of sales (units) that would necessary under the proposed program to realize the $59,000,000 of operating income that was earned in the current year. units 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? $ 8. Based on the data given, would you recommend accepting the prop a. In favor of the proposal because of the reduction in break-even point. b. In favor of the proposal because of the possibility of increasing income from operations. c. In favor of the proposal because of the increase in break-even point. d. Reject the proposal because if future sales remain at the current level, the income from operations will increase. e. Reject the proposal because the sales necessary to maintain the current income from operations would be below the current year sales. Choose the correct answer.
Transcribed Image Text:Selling expenses Administrative expenses 75% 50% 25% 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 $ Total fixed costs $ 2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year. Unit variable cost $ Unit contribution margin $ 3. Compute the break-even sales (units) for the current year. units 4. Compute the break-even sales (units) under the proposed program for the following year. units. 5. Determine the amount of sales (units) that would necessary under the proposed program to realize the $59,000,000 of operating income that was earned in the current year. units 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? $ 8. Based on the data given, would you recommend accepting the prop a. In favor of the proposal because of the reduction in break-even point. b. In favor of the proposal because of the possibility of increasing income from operations. c. In favor of the proposal because of the increase in break-even point. d. Reject the proposal because if future sales remain at the current level, the income from operations will increase. e. Reject the proposal because the sales necessary to maintain the current income from operations would be below the current year sales. Choose the correct answer.
Break-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: Selling expenses. $14,000,000 Administrative expenses 15,000,000 Total expenses $188,000,000 (100,000,000) $88,000,000 (29,000,000) $59,000,000 Operating income The division of costs between variable and fixed is as follows: Variable 70% 75% 50% Fixed 30% 25% 50% Cost of goods sold Selling expenses Administrative expenses 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 $ Total fixed costs $ 2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year. Unit variable cost $ Unit contribution margin $[ units 3. Compute the break-even sales (units) for the current year. units 4. Compute the break-even sales (units) under the proposed program for the following year. 5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $59,000,000 of operating income that was earned in the current year. units 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?
Transcribed Image Text:Break-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: Selling expenses. $14,000,000 Administrative expenses 15,000,000 Total expenses $188,000,000 (100,000,000) $88,000,000 (29,000,000) $59,000,000 Operating income The division of costs between variable and fixed is as follows: Variable 70% 75% 50% Fixed 30% 25% 50% Cost of goods sold Selling expenses Administrative expenses 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 $ Total fixed costs $ 2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year. Unit variable cost $ Unit contribution margin $[ units 3. Compute the break-even sales (units) for the current year. units 4. Compute the break-even sales (units) under the proposed program for the following year. 5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $59,000,000 of operating income that was earned in the current year. units 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?
Expert Solution
steps

Step by step

Solved in 5 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Accounting for Impairment of Assets
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS