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Break-Even Sales Under Present and Proposed Conditions

Darby Company, operating at full capacity, sold 114,800 units at a price of $108 per unit during the current year. Its income statement is as follows

Sales			$12,398,400
Cost of goods sold			4,392,000
Gross profit			$8,006,400
Expenses:
Selling expenses	$2,196,000
Administrative expenses	1,332,000
Total expenses			3,528,000
Income from operations			$4,478,400

The division of costs between variable and fixed is as follows:

	Variable		Fixed
Cost of goods sold	60%		40%
Selling expenses	50%		50%
Administrative expenses	30%		70%

Management is considering a plant expansion program for the following year that will permit an increase of $972,000 in yearly sales. The expansion will increase fixed costs by $129,600, but will not affect the relationship between sales and variable costs.

(Got everything else right but these)

3. Compute the break-even sales (units) for the current year. 73,333units 4. Compute the break-even sales (units) under the proposed program for the following year. 74,533X units 5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $4,478,400 of income from operations that was earned in the current year. 116,000 X units 6. Determine the maximum income from operations possible with the expanded plant. 5,320,800 | X

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