Darby Company, operating at full capacity, sold 101,250 units at a price of $84 per unit during the current year. Its income statement for the current year is as follows: Sales $8,505,000 Cost of goods sold 4,200,000 Gross profit $4,305,000 Expenses: Selling expenses $2,100,000 Administrative expenses 2,100,000 Total expenses 4,200,000 Income from operations $105,000 The division of costs between fixed and variable is as follows: Variable Fixed Cost of goods sold 70% 30% Selling expenses 75% 25% Administrative expenses 50% 50% Management is considering a plant expansion program that will permit an increase of $672,000 in yearly sales. The expansion will increase fixed costs by $67,200, 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. Enter the final answers rounded to the nearest dollar. Total variable costs $fill in the blank 1 Total fixed costs $fill in the blank 2 2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year. Enter the final answers rounded to two decimal places. Unit variable cost $fill in the blank 3 Unit contribution margin $fill in the blank 4 3. Compute the break-even sales (units) for the current year. Enter the final answers rounded to the nearest whole number. fill in the blank 5 units
Determine the amount of sales (units) that would be necessary under
Break-Even Sales Under Present and Proposed Conditions
Darby Company, operating at full capacity, sold 101,250 units at a price of $84 per unit during the current year. Its income statement for the current year is as follows:
| Sales | $8,505,000 | ||
| Cost of goods sold | 4,200,000 | ||
| Gross profit | $4,305,000 | ||
| Expenses: | |||
| Selling expenses | $2,100,000 | ||
| Administrative expenses | 2,100,000 | ||
| Total expenses | 4,200,000 | ||
| Income from operations | $105,000 |
The division of costs between fixed and variable is as follows:
| Variable | Fixed | |||
| Cost of goods sold | 70% | 30% | ||
| Selling expenses | 75% | 25% | ||
| Administrative expenses | 50% | 50% |
Management is considering a plant expansion program that will permit an increase of $672,000 in yearly sales. The expansion will increase fixed costs by $67,200, 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. Enter the final answers rounded to the nearest dollar.
| Total variable costs | $fill in the blank 1 |
| Total fixed costs | $fill in the blank 2 |
2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year. Enter the final answers rounded to two decimal places.
| Unit variable cost | $fill in the blank 3 |
| Unit contribution margin | $fill in the blank 4 |
3. Compute the break-even sales (units) for the current year. Enter the final answers rounded to the nearest whole number.
fill in the blank 5 units
4. Compute the break-even sales (units) under the proposed program for the following year. Enter the final answers rounded to the nearest whole number.
fill in the blank 6 units
5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $105,000 of income from operations that was earned in the current year. Enter the final answers rounded to the nearest whole number.
fill in the blank 7 units
6. Determine the maximum income from operations possible with the expanded plant. Enter the final answer rounded to the nearest dollar.
$fill in the blank 8
7. If the proposal is accepted and sales remain at the current level, what will the income or loss from operations be for the following year? Enter the final answer rounded to the nearest dollar.
$fill in the blank 9
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