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 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.

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 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.

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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