Question

Determine the amount of sales (units) that would be necessary under

Break-Even Sales Under Present and Proposed Conditions

Darby Company, operating at full capacity, sold 126,900 units at a price of $126 per unit during the current year. Its income statement for the current year is as follows:

Sales			$15,989,400
Cost of goods sold			7,896,000
Gross profit			$8,093,400
Expenses:
Selling expenses	$3,948,000
Administrative expenses	3,948,000
Total expenses			7,896,000
Income from operations			$197,400

The division of costs between fixed and variable 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 that will permit an increase of $1,260,000 in yearly sales. The expansion will increase fixed costs by $126,000, but will not affect the relationship between sales and variable costs.

6. Determine the maximum income from operations possible with the expanded plant. Enter the final answer rounded to the nearest dollar.
$

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? Enter the final answer rounded to the nearest dollar.
$

Answer 1