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Break$-$Even Sales Under Present and Proposed ConditionsKearney Company, operating at full capacity, sold $99,700$ units at a price of $$69$ per unit during $20$Y$5.$ Its income statement for $20$Y$5$ is as follows:Line Item DescriptionAmountSales $$6,879,300$ Cost of goods sold $(2,438,000)$Gross profit $$4,441,300$ Expenses: Selling expenses$$1,219,000$ Administrative expenses$736,000$ Total expenses $(1,955,000)$Operating income $$2,486,300$ The division of costs between fixed and variable is as follows:Line Item DescriptionFixedVariableCost of goods sold$40\%60\%$Selling expenses$50\%50\%$Administrative expenses$70\%30\%$Management is considering a plant expansion program that will permit an increase of $$621,000(9,000$ units at $$69$ per unit$)$ in yearly sales. The expansion will increase fixed costs by $$82,800,$ but will not affect the relationship between sales and variable costs.Instructions:$1.$ Determine for $20$Y$5$ the total fixed costs and the total variable costs.Total fixed costs fill in the blank $1$ of $2$$Total variable costs fill in the blank $2$ of $2$$$2.$ Determine for $20$Y$5($a$)$ the unit variable cost and $($b$)$ the unit contribution margin.a$.$ Unit variable cost fill in the blank $1$ of $2$$per unitb. Unit contribution margin fill in the blank $2$ of $2$$per unit$3.$ Compute the break$-$even sales $($units$)$ for $20$Y$5.$fill in the blank $1$ of $1$ units$4.$ Compute the break$-$even sales $($units$)$ under the proposed program.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 $$2,486,300$ of operating income that was earned in $20$Y$5.$fill in the blank $1$ of $1$ units$6.$ Determine the maximum operating income possible with the expanded plant.fill in the blank $1$ of $1$$$7.$ If the proposal is accepted and sales remain at the $20$Y$5$ level, what will be the operating income or loss for $20$Y$6?$fill in the blank $1$ of $2$$ fill in the blank $2$ of $28.$ Assuming a lack of market research, disadvantages for expanding the plant include all of the following except:a$.$ The break$-$even point increases.b$.$ The sales necessary to maintain the current income from operations must increase in excess of $20$Y$5$ sales.c$.$ If future sales remain at the $20$Y$5$ level, the income from operations will decline.d$.$ The maximum income from operations possible with the expanded plant is less than the current income from operations.Feedback AreaFeedback$1.$ Multiply the percentages for fixed and variable costs by each cost$\mathrm{.}2.$ Variable costs divided by number of units equals unit variable cost.Sales minus variable costs divided by units equals unit contribution margin per unit$\mathrm{.}3.$ Sales minus variable costs equals contribution margin.Fixed costs divided by unit contribution margin equals break$-$even point$\mathrm{.}4.$ Sales minus variable costs equals contribution margin. Fixed costs divided by unit contribution margin equals break$-$even point$\mathrm{.}5.($Fixed costs $+$ Target profit$)$ divided by unit contribution margin equals sales units$\mathrm{.}6.$ Sales minus fixed and variable costs equals operating income$\mathrm{.}7.$ Subtract the additional fixed costs from the operating income$\mathrm{.}8.$ Consider your analysis in questions $1-7$ when answering this question.Check My Work

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