Question

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 between fixed and variable is as follows: Variable Fixed Cost of goods sold 70% 30% 25% Selling expenses 75% Administrative expenses 50% 50% Management is considering a plant expansion program that will permit an increase of $528,000 in yearly sales. The expansion will increase fixed costs by $52,800, 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 $ $ 3,773,600 1,922,400 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 $ 31.41 Unit contribution margin $ 16.59 3. Compute the break-even sales (units) for the current year. Enter the final answers rounded to the nearest whole number. 115,877 units

Answer 1

4.

Break even sales under proposed program = $1,922,400+52,800 / $16.59 = 119,060 units

5.

Desired sales units = $1,975,200+71,200 / $16.59 = 123,351 units

6.

Maximum income from operations :

Increase in sales units = $528,000 / $48 = 11,000 units

Sales (120,150+11,000)*$48	$6,295,200
Variable cost (131,150*$31.41)	4,119,422
Contribution margin	2,175,778
Fixed costs	1,975,200
Income from operations	$200,578

7.

Income or loss from operations at current sales level = $71,200 - 52,800 = $18,400

8. In favor of the proposal because of the possibility of increasing income from operations.