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
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Required:
1. Determine the total variable costs and the total fixed costs for the current year.
Total variable costs
86,000,000 V
Total fixed costs
39,400,000
2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year.
Unit variable cost
86
Unit contribution margin
100
3. Compute the break-even sales (units) for the current year.
394,000 V units
4. Compute the break-even sales (units) under the proposed program for the following year.
424,000 V units
5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $60,600,000 of operating income that
was earned in the current year.
1,030,000 units
6. 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
Transcribed Image Text:Required: 1. Determine the total variable costs and the total fixed costs for the current year. Total variable costs 86,000,000 V Total fixed costs 39,400,000 2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year. Unit variable cost 86 Unit contribution margin 100 3. Compute the break-even sales (units) for the current year. 394,000 V units 4. Compute the break-even sales (units) under the proposed program for the following year. 424,000 V units 5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $60,600,000 of operating income that was earned in the current year. 1,030,000 units 6. 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 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%
expenses
Management is considering a plant expansion program for the following year that will permit an increase of 511,160,000 in yearly sales. The
expansion will increase fixed costs by $3,000,0000 but will not affect the relationship between sales and variable costs,
Transcribed Image Text: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% expenses Management is considering a plant expansion program for the following year that will permit an increase of 511,160,000 in yearly sales. The expansion will increase fixed costs by $3,000,0000 but will not affect the relationship between sales and variable costs,
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