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Break-Even Sales Under Present and Proposed Conditions Portmann Company, operating at full capacity, sold 1,000,000...

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Accounting

Break-Even Sales Under Present and Proposed Conditions

Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $189 per unit during the current year. Its income statement is as follows:

Sales $189,000,000
Cost of goods sold (99,000,000)
Gross profit $90,000,000
Expenses:
Selling expenses $16,000,000
Administrative expenses 15,400,000
Total expenses (31,400,000)
Operating income $58,600,000

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

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

Management is considering a plant expansion program for the following year that will permit an increase of $11,340,000 in yearly sales. The expansion will increase fixed costs by $5,000,000 but will not affect the relationship between sales and variable costs.

Required:

6. Determine the maximum operating income possible with the expanded plant. $fill in the blank 8

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