Break-Even Sales Under Present and Proposed Conditions Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $189 per unit during the current year. Its income statement is as follows: Sales $189.000.000 Cost of goods sold (101.000,000) Gross profit $88,000,000 Expenses: Selling expenses $16,000,000 Administrative expenses 12,600,000 Total expenses (28,600.000) Operating income $59,400,000 The division of costs between variable and fioxed is as follows: Variable Fixed Cost of goods sold 70% 30% Selling expenses 75% 25% Administrative 50% 50%% expenses Management is considering a plant expansion program for the following year that will permit an increase of $9,450,000 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 S 89,000,000 v 40,600,000 v Total fixed costs 2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year. Unit variable cost 89 V Unit contribution margin 100 V 3. Compute the break-even sales (units) for the current year. 406,000 V units 4. Compute the break-even sales (units) under the proposed program for the folloving year. 451,000 v units 5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $59,400,000 of operating income that was earned in the current year. 1,045,000 V units . 6. Determine the maximum operating income possible with the expanded plant. $ 91,119,047 x 7. If the proposal is accepted and sales remain at the current level, vwhat will the operating income or loss be for the following year?
Break-Even Sales Under Present and Proposed Conditions Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $189 per unit during the current year. Its income statement is as follows: Sales $189.000.000 Cost of goods sold (101.000,000) Gross profit $88,000,000 Expenses: Selling expenses $16,000,000 Administrative expenses 12,600,000 Total expenses (28,600.000) Operating income $59,400,000 The division of costs between variable and fioxed is as follows: Variable Fixed Cost of goods sold 70% 30% Selling expenses 75% 25% Administrative 50% 50%% expenses Management is considering a plant expansion program for the following year that will permit an increase of $9,450,000 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 S 89,000,000 v 40,600,000 v Total fixed costs 2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year. Unit variable cost 89 V Unit contribution margin 100 V 3. Compute the break-even sales (units) for the current year. 406,000 V units 4. Compute the break-even sales (units) under the proposed program for the folloving year. 451,000 v units 5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $59,400,000 of operating income that was earned in the current year. 1,045,000 V units . 6. Determine the maximum operating income possible with the expanded plant. $ 91,119,047 x 7. If the proposal is accepted and sales remain at the current level, vwhat will the operating income or loss be for the following year?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Please help with 6 & 7
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 $189 per unit during the current year. Its income statement is as follows:
Sales
$189,000,000
Cost of goods sold
(101,000,000)
Gross profit
$88,000,000
Expenses:
Selling expenses
$16,000,000
Administrative expenses
12,600,000
Total expenses
(28,600,000)
Operating income
$59,400,000
The division of costs between variable and fixxed is as follows:
Variable
Fixed
Cost of goods sold
70%
30%
Selling expenses
75%
25%
Administrative
50%
50%
expenses
Management is considering a plant expansion program for the following year that will permit an increase of $9,450,000 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
$ 89,000,000 v
Total fixed costs
40,600,000 v
2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year.
Unit variable cost
89 V
Unit contribution margin
100 V
3. Compute the break-even sales (units) for the current year.
406,000 V units
4. Compute the break-even sales (units) under the proposed program for the following year.
451,000 v units
5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $59,400,000 of operating income that was earned in the current year.
1,045,000 v units
6. Determine the maximum operating income possible with the expanded plant.
$ 91,119,047 x
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?
115,200,000 X Income v
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