eBook Show Me HowQuestion Content AreaBreak-Even Sales Under Present and Proposed ConditionsPortmann 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 $188,000,000 Cost of goods sold (99,000,000)Gross profit $89,000,000 Expenses: Selling expenses$15,000,000 Administrative expenses14,900,000 Total expenses (29,900,000)Operating income $59,100,000The division of costs between variable and fixed is as follows: VariableFixedCost of goods sold70% 30% Selling expenses75% 25% Administrative expenses50% 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 $3,500,000 but will not affect the relationship between sales and variable costs. 5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $59,100,000 of operating income that was earned in the current year.

The objective of the question is to calculate the number of units that need to be sold under the…

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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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Question Content Area

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		$188,000,000
Cost of goods sold		(99,000,000)
Gross profit		$89,000,000
Expenses:
Selling expenses	$15,000,000
Administrative expenses	14,900,000
Total expenses		(29,900,000)
Operating income		$59,100,000

The division of costs between variable and fixed 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 for the following year that will permit an increase of $11,280,000 in yearly sales. The expansion will increase fixed costs by $3,500,000 but will not affect the relationship between sales and variable costs.

5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $59,100,000 of operating income that was earned in the current year.

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