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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 $188 per unit during the current year. Its income statement is as follows:

Line Item Description	Amount	Amount
Sales		$188,000,000
Cost of goods sold		(100,000,000)
Gross profit		$88,000,000
Expenses:
Selling expenses	$16,000,000
Administrative expenses	12,000,000
Total expenses		(28,000,000)
Operating income		$60,000,000

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

Line Item Description	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 $11,280,000 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:

1. Determine the total variable costs and the total fixed costs for the current year. Total variable costs fill in the blank 1 of 2$ Total fixed costs fill in the blank 2 of 2$

2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year. Unit variable cost fill in the blank 1 of 2$ Unit contribution margin fill in the blank 2 of 2$

3. Compute the break-even sales (units) for the current year. fill in the blank 1 of 1 units

4. Compute the break-even sales (units) under the proposed program for the following year. fill in the blank 1 of 1 units

5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $60,000,000 of operating income that was earned in the current year. fill in the blank 1 of 1 units

6. Determine the maximum operating income possible with the expanded plant. fill in the blank 1 of 1$

7. If the proposal is accepted and sales remain at the current level, what will the operating income or loss be for the following year? fill in the blank 1 of 2$

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