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: $16,000,000 Administrative expenses 12,000,000 Total expenses Selling expenses $188,000,000 (100,000,000) $88,000,000 Cost of goods sold Selling expenses Administrative expenses (28,000,000) $60,000,000 Operating income The division of costs between variable and fixed is as follows: Variable Fixed 70% 30% 75% 25% 50% 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 $5,000,000 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
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: $16,000,000 Administrative expenses 12,000,000 Total expenses Selling expenses $188,000,000 (100,000,000) $88,000,000 Cost of goods sold Selling expenses Administrative expenses (28,000,000) $60,000,000 Operating income The division of costs between variable and fixed is as follows: Variable Fixed 70% 30% 75% 25% 50% 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 $5,000,000 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: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter5: Inventories And Cost Of Goods Sold
Section: Chapter Questions
Problem 5.23MCE
Related questions
Question
![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:
$16,000,000
Administrative expenses 12,000,000
Total expenses
Selling expenses
Operating income
$188,000,000
(100,000,000)
$88,000,000
Cost of goods sold
Selling expenses
Administrative expenses
(28,000,000)
$60,000,000
The division of costs between variable and fixed is as follows:
Fixed
30%
25%
50%
Variable
70%
75%
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 $5,000,000 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 be necessary under the
proposed program to realize the $60,000,000 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?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3aff424b-0e96-4e90-b1d6-dc40303839e0%2Fc8f73cb5-ccb0-4482-9e90-98f9b3a0590d%2Fxjul40o_processed.jpeg&w=3840&q=75)
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:
$16,000,000
Administrative expenses 12,000,000
Total expenses
Selling expenses
Operating income
$188,000,000
(100,000,000)
$88,000,000
Cost of goods sold
Selling expenses
Administrative expenses
(28,000,000)
$60,000,000
The division of costs between variable and fixed is as follows:
Fixed
30%
25%
50%
Variable
70%
75%
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 $5,000,000 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 be necessary under the
proposed program to realize the $60,000,000 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
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 5 steps with 4 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Follow-up Questions
Read through expert solutions to related follow-up questions below.
Follow-up Question
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 $60,000,000 of operating income that was earned in the current year.
6. Determine the maximum operating income possible with the expanded plant.
Solution
Recommended textbooks for you
![Financial Accounting: The Impact on Decision Make…](https://www.bartleby.com/isbn_cover_images/9781305654174/9781305654174_smallCoverImage.gif)
Financial Accounting: The Impact on Decision Make…
Accounting
ISBN:
9781305654174
Author:
Gary A. Porter, Curtis L. Norton
Publisher:
Cengage Learning
![Intermediate Accounting: Reporting And Analysis](https://www.bartleby.com/isbn_cover_images/9781337788281/9781337788281_smallCoverImage.jpg)
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
![Financial Accounting: The Impact on Decision Make…](https://www.bartleby.com/isbn_cover_images/9781305654174/9781305654174_smallCoverImage.gif)
Financial Accounting: The Impact on Decision Make…
Accounting
ISBN:
9781305654174
Author:
Gary A. Porter, Curtis L. Norton
Publisher:
Cengage Learning
![Intermediate Accounting: Reporting And Analysis](https://www.bartleby.com/isbn_cover_images/9781337788281/9781337788281_smallCoverImage.jpg)
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning