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 79,650 units at a price of $60 per unit during the current year. Its income statement for the current year is as follows: Sales $4,779,000 Cost of goods sold 2,360,000 Gross profit $2,419,000 Expenses: Selling expenses $1,180,000 1,180,000 Administrative expenses Total expenses 2,360,000 Income from operations $59,000 The division of costs between fixed and variable is as follows: Variable Fixed Cost of goods sold 70% 30% Selling expenses 75% 25% Administrative 50% 50% expenses

Answer 1

Required: 1 Cost of goods sold Selling Expenses Administrative Expenses Total Fixed / 708000 295000 590000 1593000 Variable 1652000 885000 590000 3127000 Required: 2 Unit variable cost = Total variable cost / units produced Total variable cost units produced Unit variable cost 3127000 79650 39.26 60.00 Units contribution margin = Selling price - Variable cost per unit Selling price Variable cost per unit Unit contribution margin 39.26 20.74 Required: 3 Break even point(units) = Fixed cost / Contribution margin per unit Fixed cost Contribution margin per unit Break even point (units) 1593000 20.74 76808

Required: 4 Break even point(units) = Fixed cost / Contribution margin per unit Fixed cost Increased Fixed cost Total New Fixed cost Contribution margin per unit Break even point (units) 1593000 36000 1629000 20.74 78544 Required: 5 Determined sales units = (New Fixed cost + Desire Income) / Contribution margin New Fixed cost Desired Income Contribution margin per unit Determined Sales units 1629000 59000 20.74 81389 Required: 6 Maximum Income from operation = Total New sales - Total New variable cost - Total Fixed cost Sales 4779000 Increased sales 360000 Total New sales 5139000 Variable cost 3127000 New variable cost 235556 Total New variable cost 3362556 Total New Fixed cost 1629000 Maximum Income from operation 147444

Number of units = Increase in sales / Price per unit New variable cost = Number of units * Unit variable cost Increased sales Price per unit Number of units Unit variable cost New Variable cost 360000 60 6000 39.26 235556 Required: 7 Net Income = Sales - Variable cost-New Fixed cost Sales Less: Variable cost Less: New Fixed cost Net Income 4779000 3127000 1629000 23000