Question

1. Determine the amount of sales (units) that would be necessary under

   Break-Even Sales Under Present and Proposed Conditions

   Darby Company, operating at full capacity, sold 74,250 units at a price of $51 per unit during the current year. Its income statement for the current year is as follows:

   Sales			$3,786,750
   Cost of goods sold			1,870,000
   Gross profit			$1,916,750
   Expenses:
   Selling expenses	$935,000
   Administrative expenses	935,000
   Total expenses			1,870,000
   Income from operations			$46,750

   The division of costs between fixed and variable 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 that will permit an increase of $306,000 in yearly sales. The expansion will increase fixed costs by $30,600, 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 $46,750 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 proposal is accepted and sales remain at the current level, what will the income or loss from operations be for the following year? Enter the final answer rounded to the nearest dollar.
   $  

   8. Based on the data given, would you recommend accepting the proposal?

   1. In favor of the proposal because of the reduction in break-even point.
   2. In favor of the proposal because of the possibility of increasing income from operations.
   3. In favor of the proposal because of the increase in break-even point.
   4. Reject the proposal because if future sales remain at the current level, the income from operations will increase.
   5. Reject the proposal because the sales necessary to maintain the current income from operations would be below the current year sales.

   Choose the correct answer.

Answer 1

as per HomeworkLib policy i have answered first 4 question for rest of question please raise new request.. please do provide rating..

	Given that-
	Sales			$3,786,750
	Cost of goods sold			1,870,000
	Gross profit			$1,916,750
	Expenses:
	Selling expenses	$935,000
	Administrative expenses	935,000
	Total expenses			1,870,000
	Income from operations			$46,750
		Variable	Fixed
	Cost of goods sold	70%	30%
	Selling expenses	75%	25%
	Administrative expenses	50%	50%
Answer 1)
			Variable	Fixed		Variable	Fixed
	Cost of goods sold	1,870,000	70%	30%		1309000	561000
	Selling expenses	$935,000	75%	25%		701250	233750
	Administrative expenses	935,000	50%	50%		467500	467500
	Total	3,740,000				2477750	1262250
	Total variable costs	2477750
	Total fixed costs	1262250
Answer 2)
	Computation of unit variable cost
		i		ii=i/74250
		Total variable cost		Unit variable cost
	Cost of goods sold	1309000		$             17.63
	Selling expenses	701250		$               9.44
	Administrative expenses	467500		$               6.30
	Total	2477750		$             33.37
	Computation of unit Contribution = Sales per unit - Variable cost per unit
	Sales per unit	$        51.00
	Variable cost per unit	$        33.37
	Contribution per unit	$        17.63
	Unit variable cost	$        33.37
	Unit contribution margin	$        17.63
Answer 3)	Compute the break-even sales (units) for the current year
	Break even sales = Total fixed cost / Contribution per unit
i	Total fixed cost =	1262250
ii	Contribution per unit =	$        17.63
iii=i/ii	Break even unit =	71,598
Answer 4)	Compute the break-even sales (units) under the proposed program for the following year
i	Total fixed cost = 1262250+30,600			$ 1,292,850.00
ii	Contribution per unit =			$             17.63
iii=i/ii	Break even unit =			73,334