Question

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 Total fixed costs 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 Unit contribution margin 3. Compute the break-even sales (units) for the current year. Enter the final answers rounded to the nearest whole number. 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 units 5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $135,300 of income from operations that was earned in the current year. Enter the final answers rounded to the nearest whole number. units 6. Determine the maximum income from operations possible with the expanded plant. Enter the final answer rounded to the nearest dollar. 7. If the pronosal is accented and sales remain at the current level. what will the income or loss from onerations be for the followina vear? Enter the final answer

Answer 1

1. Total variable costs and total fixed costs

Total variable costs = 70% of cost of goods sold + 75% of selling expenses + 50% of administrative expenses = 70% of $5,412,000 + 75% of $2,706,000 + 50% of $2,706,000 = $7,170,900

Total Fixed costs = 30% of cost of goods sold + 25% of selling expenses + 50% of administrative expenses = 30% of $5,412,000 + 25% of $2,706,000 + 50% of $2,706,000 = $3,653,100

2. Unit variable cost = Total variable costs / Total units sold = $7,170,900 / 110,700 units = $64.78

Unit contribution margin = Unit selling price - Unit variable cost = $99 - $64.78 = $34.22

3. Break-even sales (in units) for the current year = Total fixed costs / Unit contribution margin = $3,653,100 / $34.22 = $106,753 units.

4. Break-even sales (in units) under the proposed program = Total fixed costs under the proposed program / unit contribution margin = ( $3,653,100 + $89,100) / $34.22 = 109,357 units.

5. Units necessary to be sold to realize $135,300 income under proposed program = ( Total fixed costs under the proposed program + Expected income ) / unit contribution = ( $3,653,100 + $89,100 + $135,300 ) / $34.22 = 113,311 units.