Need Help I Answer some but stuck.
Break-Even Sales Under Present and Proposed Conditions
Darby Company, operating at full capacity, sold 70,200 units at a price of $57 per unit during the current year. Its income statement for the current year is as follows:
Sales | $4,001,400 | ||
Cost of goods sold | 1,976,000 | ||
Gross profit | $2,025,400 | ||
Expenses: | |||
Selling expenses | $988,000 | ||
Administrative expenses | 988,000 | ||
Total expenses | 1,976,000 | ||
Income from operations | $49,400 |
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 $342,000 in yearly sales. The expansion will increase fixed costs by $34,200, but will not affect the relationship between sales and Costs that vary in total dollar amount as the level of activity changes.variable costs.
Required:
Total variable costs $2,618,200.00 | $ |
Total fixed costs $1,333,800.00 | $ |
Unit variable cost | $ 37.30 |
Unit contribution margin | $ 19.70 |
Choose the correct answer.
b
Feedback
1. Multiply the percentages for fixed and variable costs by each cost.
2. a. Divide the total variable costs by number of units.
2. b. Sales price per unit minus variable costs per unit equals contribution margin per unit.
3. Fixed costs divided by unit contribution margin equals break-even point.
4. Fixed costs under the proposed program divided by contribution margin equals new break-even point.
5. (Fixed costs + Target profit) divided by unit contribution margin equals sales units.
6. Determine the increase in units by dividing the sales increase by the price per unit. Add the additional revenue and additional fixed costs when calculating:
Sales minus fixed and variable costs equals income from operations.
7. Subtract the additional fixed costs from the operating income.
8. Consider the break-even point and the sales needed for the proposed level.
Learning Objective 2, Learning Objective 3.
Loading item
There was an error loading this item. If this continues to occur, please contact Technical Support.
Check My Work
Basic Calculatorclose
0
UseEntBSBSpCEHomCEnd
789+
456-
123*
0.=/
Solution
Solution
Darby Company
Determination of total variable costs and the costs that tend to remain the same in amount regardless of variations in the level of activity:
Total variable costs –
Cost of goods sold 70% x 1,976,000 = $1,383,200
Selling expenses 75% x 988,000 = $741,000
Administrative expenses 50% x 988,000 = $494,000
Total variable expenses = $2,618,200
Total fixed costs –
Cost of goods sold 30% x 1,976,000 = $592,800
Selling expenses 25% x 988,000 = $247,000
Administrative expenses 50% x 988,000 = $494,000
Total fixed cost = $1,333,800
Unit Variable cost = total variable cost/units sold
= $2,618,200/70,200 units
= $37.30 per unit
Unit Contribution margin = unit selling price – unit variable cost
= $57 – 37.30 = $19.70
Determination of the break-even unit sales for current year:
Break-even unit sales = total fixed cost/contribution margin per unit
= $1,333,800/$19.70 = 67,706 units
Determination of the break-even unit sales under the proposed program for the following year:
Proposed program –
Increase in yearly sales = $342,000
Increase in fixed cost = 34,200
Revised sales = $4,001,400 + $342,000 = $4,343,400
Percent increase in sales = 342,000/4,001,400 = 8.55%
Increased variable cost = 2,618,200 + 8.55% x 2,618,200 = $2,842,000
Increased fixed cost = $1,333,800 +34,200 = $1,368,000
Contribution margin = sales – variable cost
= 4,343,400 – 2,842,000 = $1,501,400
Sales units = $4,343,400/$57 = 76,200 units
Contribution margin per unit = $1,501,400/76,200 units = $19.70
Break-even sales units under the proposed program = $1,368,000/$19.70 = 69,442 units
Determination of the amount of sales needed to realize $49,400 income from operations under the proposed program:
Desired sales = (target income + fixed cost)/contribution margin
Target income = $49,400
Fixed cost –
Original fixed cost $1,333,800
Add: increase $34,200
Total fixed cost $1,368,000
Contribution margin = sales – variable cost
Sales price = $57
Variable cost per unit = $37.30
Contribution margin per unit = $19.70
Desired sales = (49,400 + 1,368,000)/$19.70 = 71,949 units
Determination of maximum income possible from expanded plant:
Revised Sales $4,343,400
Less: Variable costs $2,842,000
Contribution margin $1,501,400
Less: Fixed cost $1,368,000
Net operating income $133,400
If proposal accepted and sales remain at current level, determination of net income:
Sales $4,001,400
Variable cost $2,618,200
Contribution margin $1,383,200
Fixed cost $1,368,000
Net operating income $15,200
Based on the given data, the proposed program could be accepted –
In favour of the proposal because of the possibility of increasing income from operations.
The income from operations under the proposed program would be $133,400. Hence, the proposed program would increase income from operations by $84,000 ($133,400 – 49,400).
Need Help I Answer some but stuck. Determine the amount of sales (units) that would be...
Please help with 4-8 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 120,150 units at a price of $48 per unit during the current year. Its income statement for the current year is as follows: Sales $5,767,200 Cost of goods sold 2,848,000 $2,919,200 Gross profit Expenses: Selling expenses Administrative expenses $1,424,000 1,424,000 Total expenses 2,848,000 Income from operations $71,200 The division of costs...
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 99,900 units at a price of $93 per unit during the current year. Its income statement for the current year is as follows: $9,290,700 4,588,000 Sales Cost of goods sold Gross profit Expenses: $4,702,700 Selling expenses $2,294,000 Administrative expenses 2,294,000 Total expenses 4,588,000 Income from operations $114,700 The division of costs between fixed and variable...
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 99,900 units at a price of $93 per unit during the current year. Its income statement for the current year is as follows: $9,290,700 4,588,000 Sales Cost of goods sold Gross profit Expenses: $4,702,700 Selling expenses $2,294,000 Administrative expenses 2,294,000 Total expenses 4,588,000 Income from operations $114,700 The division of costs between fixed and variable...
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 117,450 units at a price of $120 per unit during the current year. Its income statement for the current year is as follows: Sales $14,094,000 Cost of goods sold 6,960,000 Gross profit $7,134,000 Expenses: Selling expenses $3,480,000 Administrative expenses 3,480,000 Total expenses 6,960,000 Income from operations $174,000 The division of costs between fixed and variable...
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 75,600 units at a price of $135 per unit during the current year. Its income statement for the current year is as follows Sales Cost of goods sold Gross profit Expenses $10,206,000 5,040,000 $5,166,000 Selling expenses $2,520,000 Administrative expenses 2,520,000 Total expenses 5,040,000 Income from operations $126,000 The division of costs between fixed and variable...
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 78,300 units at a price of $51 per unit during the current year. Its income statement for the current year is as follows: Sales $3,993,300 Cost of goods sold 1,972,000 Gross profit $2,021,300 Expenses: Selling expenses $986,000 Administrative expenses 986,000 Total expenses 1,972,000 Income from operations $49,300 The division of costs between fixed and variable...
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...
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 70,200 units at a price of $81 per unit during the current year. Its income statement for the current year is as follows: Sales $5,686,200 Cost of goods sold 2,808,000 Gross profit $2,878,200 Expenses: Selling expenses $1,404,000 Administrative expenses 1,404,000 Total expenses 2,808,000 Income from operations $70,200 The division of costs between fixed and variable...
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 82,350 units at a price of $63 per unit during the current year. Its income statement for the current year is as follows: Sales Cost of goods sold Gross profit Expenses: $5,188,050 2,562,000 $2,626,050 $1,281,000 Selling expenses Administrative expenses 1,281,000 2,562,000 Total expenses $64,050 Income from operations The division of costs between fixed and variable...
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 112,050 units at a price of $129 per unit during the current year. Its income statement for the current year is as follows: Sales $14,454,450 Cost of goods sold 7,138,000 Gross profit $7,316,450 Expenses: Selling expenses $3,569,000 Administrative expenses 3,569,000 Total expenses 7,138,000 Income from operations $178,450 The division of costs between fixed and variable...