Required:1. Determine the total variable costs and the total fixed costs for the current year.Total variable costs86,000,000 VTotal fixed costs39,400,0002. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year.Unit variable cost86Unit contribution margin1003. Compute the break-even sales (units) for the current year.394,000 V units4. Compute the break-even sales (units) under the proposed program for the following year.424,000 V units5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $60,600,000 of operating income thatwas earned in the current year.1,030,000 units6. 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?Income Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $186 per unit during the current year. Its income statement is asfollows:Sales$186,000,000Cost of goods sold(99,000,000)Gross profit$87,000,000Expenses:Selling expenses$14,000,000Administrative expenses 12,400,000Total expenses(26,400,000)$60,600,000Operating incomeThe division of costs between variable and fixed is as follows:VariableFixed70%30%Cost of goods sold75%25%Selling expensesAdministrative50%50%expensesManagement is considering a plant expansion program for the following year that will permit an increase of 511,160,000 in yearly sales. Theexpansion will increase fixed costs by $3,000,0000 but will not affect the relationship between sales and variable costs,

As in question 5 Parts are solved therefore only 6 and 7 parts are solved now. 1.Maximum Operating income Possible with Plant Existing Variable cost proportion = (86,000,000 / 186,000,000) x 100 = 46.24% CALCULATION PARTICULAR AMOUNT A = 186,000,000 + 11,160,000 Revised Sales 197,160,000 B= A x 46.24% Variable Cost 91,166,784 C= A-B Contribution 105,993,216 D= 39,400,000 + 3,000,000 Fixed Cost 42,400,000 E=C-D Profit 63,593,216 Maximum Expanded Profit = 63,593,2167. If proposal accepted and sales remain at current level . because proposal accepted then fixed cost will increased as given in the question. CALCULATION PARTICULAR AMOUNT A = 186,000,000 Revised Sales 186,000,000 B Variable Cost 86,000,000 C= A-B Contribution 100,000,000 D= 39,400,000 + 3,000,000 Fixed Cost 42,400,000 E=C-D Profit 57,600,000 If proposal accepted and current sales level remain the same then the profit will be = 57,600,000.

Business

Accounting

Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $186 per unit during the current year. Its income statement is as follows: Sales $186,000,000 Cost of goods sold (99,000,000) Gross profit $87,000,000 Expenses: Selling expenses $14,000,000 Administrative expenses 12,400,000 Total expenses (26,400,000) $60,600,000 Operating income The division of costs between variable and fixed is as follows: Variable Fixed 70% 30% Cost of goods sold 75% 25% Selling expenses Administrative 50% 50% Management is considering a plant expansion program for the following year that will permit an increase of $11,160,000 in yearly sales, The rinn will increase fixed costs by $3,000,000 but will not affect the relationship between sales and variable costs. expenses

Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $186 per unit during the current year. Its income statement is as follows: Sales $186,000,000 Cost of goods sold (99,000,000) Gross profit $87,000,000 Expenses: Selling expenses $14,000,000 Administrative expenses 12,400,000 Total expenses (26,400,000) $60,600,000 Operating income The division of costs between variable and fixed is as follows: Variable Fixed 70% 30% Cost of goods sold 75% 25% Selling expenses Administrative 50% 50% Management is considering a plant expansion program for the following year that will permit an increase of $11,160,000 in yearly sales, The rinn will increase fixed costs by $3,000,000 but will not affect the relationship between sales and variable costs. expenses

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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