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Howard industries inc., operating at full capacity, sold 64,000 units at a price of $45 per unit during the current year. Its in come statement is as follows: Sales. $280,000 1400,000 $1,480,000 Cost of goods sold Gross profit.. Expenses Selling expenses. Administrative expenses Total expenses.. Income from operations $400,000 387.500 787,500 s 692,500 The division of costs between variable and fixed is as follows: Flxed Variable Cost of goods sold 25% 75% 40% Selling expenses Administrative expenses 20% 80% Management is considering a plant expansion program for the following year that will permit an increase of $90,000 in yearly sales. The expansion will increase fixed costs by $212,500 but will not affect the relationship between sales and variable costs. Instructions tetal rariable cor 1. Determine the total fixed costs and the total variable costs for the current year. 2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current. year.nit va blecestr5, os nait c ont,Laitin 200 3. Compute the break-even sales (units) for the current year. 29,375 arit, Answer o6(Au 4. Compute the break-even sales (units) under the proposed program for the following year. Lto 5. Determine the amount of sales (units) that would be neces sary under the proposed program to realize the $692,500 of income from operations that was earned in the current year.4,6 25 units 80,000 6. Determine the maximum income from operations possible with the expanded plant. 7. If the proposal is accepted and sales remain at the current level, what will the income or loss from operations be for the following year 4 8o,00 Based on the data given, would you recommend accepting the proposal? Explain. incom 8

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