Question

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 125,550 units at a price of $69 per unit during the current year. Its income statement for the current year is as follows: Sales $8,662,950 Cost of goods sold 4,278,000 $4,384,950 Gross profit Expenses: Selling expenses $2,139,000 Administrative expenses 2,139,000 penses Total expenses 4,278,000 Income from operations $106,950 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 $690,000 in yearly sales. The expansion will increase fixed costs by $69,000, 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

Answer 1

1	Existing Scenario
	Calculation of Variable and Fixed cost
	Particulars	Variable Cost	Fixed Cost
	Cost of goods sold (70%:30%)	2994600	1283400.00
	Selling Expenses (75%:25%)	1604250	534750.00
	Administrative(50%:50%)	1069500	1069500.00
	Total	5668350	2887650.00
2	Calculation of Unit Variable Cost
	total variable cost / No. of units
	5668350/125550	=	45.15
	Calculation of Unit Contribution
	Sales		69.00
	Variable Cost		-45.15
	Contribution		23.85
3	Calculation of Break Even Sales
	Fixed Cost/Contribution per unit
	2887650/23.85		121075.47
4	Calculation of Break Even Sales
	Sales per unit (8662950+690000)/125550		74.50
	Variable cost per unit		45.15
	Contribution		29.35
	Fixed Cost(2887650+69000)		2956650.00
	2956650/29.35		100737.65