#9 - Determine the amount of sales (units) that would benecessary under

Break-Even Sales Under Present and Proposed Conditions

Darby Company, operating at full capacity, sold 75,600 units ata price of $120 per unit during the current year. Its incomestatement for the current year is as follows:

Sales			$9,072,000
Cost of goods sold			4,480,000
Gross profit			$4,592,000
Expenses:
Selling expenses	$2,240,000
Administrativeexpenses	2,240,000
Total expenses			4,480,000
Income from operations			$112,000

The division of costs between fixed and variable is asfollows:

	Variable		Fixed
Cost of goods sold	70%		30%
Selling expenses	75%		25%
Administrative expenses	50%		50%

Management is considering a plant expansion program that willpermit an increase of $720,000 in yearly sales. The expansion willincrease fixed costs by $72,000, but will not affect therelationship between sales and variable costs.

Required:

1. Determine the total variable costs and thetotal fixed costs for the current year. Enter the final answersrounded 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 finalanswers rounded to two decimal places.

Unit variable cost	$
Unit contribution margin	$

3. Compute the break-even sales (units) for thecurrent year. Enter the final answers rounded to the nearest wholenumber.
units

4. Compute the break-even sales (units) underthe proposed program for the following year. Enter the finalanswers rounded to the nearest whole number.
units

5. Determine the amount of sales (units) thatwould be necessary under the proposed program to realize the$112,000 of income from operations that was earned in the currentyear. Enter the final answers rounded to the nearest wholenumber.
units

6. Determine the maximum income from operationspossible with the expanded plant. Enter the final answer rounded tothe nearest dollar.
$

7. If the proposal is accepted and sales remainat the current level, what will the income or loss from operationsbe for the following year? Enter the final answer rounded to thenearest dollar.
$ Income