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Break$-$even sales under present and proposed conditions

Portmann Company, operating at full capacity, sold $1,000,000$ units at a price of $$190$ per unit during the current year. Its income statement is as follows:

Sales

Cost of goods sold

Gross profit

Expenses:

Selling expenses

Administrative expenses

Total expenses

Operating income

$$190,000,000$

$\frac{(101,000,000)}{\text{\$}89,000,000}$

$$190,000,000$

$\frac{(101,000,000)}{\text{\$}89,000,000}$

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

by $$4,000,000$ but will not affect the relationship between sales and variable costs.

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Determine the total variable costs and the total fixed costs for the current year.

Total variable costs :

Total fixed costs $

Determine $($a$)$ the unit variable cost and $($b$)$ the unit contribution margin for the current year.

Unit variable cost $

Unit contribution margin :

Compute the break$-$even sales $($units$)$ for the current year.

units

Compute the break$-$even sales $($units$)$ under the proposed program for the following year.

units

year.

units

Determine the maximum operating income possible with the expanded plant.

$

If the proposal is accepted and sales remain at the current level, what will the operating income or loss be for the following year?

$

Based on the data given, would you recommend accepting the proposal?

a$.$ In favor of the proposal because of the reduction in break$-$even point.

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

c$.$ In favor of the proposal because of the increase in break$-$even point.

d$.$ Reject the proposal because if future sales remain at the current level, the income from operations will increase.

e$.$ Reject the proposal because the sales necessary to maintain the current income from operations would be below the current year sales.

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