Darby Company, operating at full capacity, sold 124,200 units at a price of $84 per unit during the current year. Its income statement is as follows: Sales $10,432,800 Cost of goods sold 3,696,000 Gross profit $6,736,800 Expenses: Selling expenses $1,848,000 Administrative expenses 1,120,000 Total expenses 2,968,000 Income from operations $3,768,800 The division of costs between variable and fixed is as follows: Variable Fixed Cost of goods sold 60% 40% Selling expenses 50% 50% Administrative expenses 30% 70% Management is considering a plant expansion program for the following year that will permit an increase of $924,000 in yearly sales. The expansion will increase fixed costs by $123,200, but will not affect the relationship between sales and variable costs. 4. Compute the break-even sales (units) under the proposed program for the following year. fill in the blank 6 units 5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $3,768,800 of income from operations that was earned in the current year. fill in the blank 7 units 6. Determine the maximum income from operations possible with the expanded plant. $fill in the blank 8
Break-Even Sales Under Present and Proposed Conditions
Darby Company, operating at full capacity, sold 124,200 units at a price of $84 per unit during the current year. Its income statement is as follows:
| Sales | $10,432,800 | ||
| Cost of goods sold | 3,696,000 | ||
| Gross profit | $6,736,800 | ||
| Expenses: | |||
| Selling expenses | $1,848,000 | ||
| Administrative expenses | 1,120,000 | ||
| Total expenses | 2,968,000 | ||
| Income from operations | $3,768,800 |
The division of costs between variable and fixed is as follows:
| Variable | Fixed | |||
| Cost of goods sold | 60% | 40% | ||
| Selling expenses | 50% | 50% | ||
| Administrative expenses | 30% | 70% |
Management is considering a plant expansion program for the following year that will permit an increase of $924,000 in yearly sales. The expansion will increase fixed costs by $123,200, but will not affect the relationship between sales and variable costs.
4. Compute the break-even sales (units) under the proposed program for the following year.
fill in the blank 6 units
5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $3,768,800 of income from operations that was earned in the current year.
fill in the blank 7 units
6. Determine the maximum income from operations possible with the expanded plant.
$fill in the blank 8
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