Question
In: Accounting
Thanks in advance! Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity,...
Thanks in advance!
Break-Even Sales Under Present and Proposed Conditions
Darby Company, operating at full capacity, sold 108,000 units at a price of $78 per unit during the current year. Its income statement for the current year is as follows:
| Sales | $8,424,000 | ||
| Cost of goods sold | 4,160,000 | ||
| Gross profit | $4,264,000 | ||
| Expenses: | |||
| Selling expenses | $2,080,000 | ||
| Administrative expenses | 2,080,000 | ||
| Total expenses | 4,160,000 | ||
| Income from operations | $104,000 |
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 $702,000 in yearly sales. The expansion will increase fixed costs by $70,200, 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. Enter the final answers rounded to the nearest dollar.
| Total variable costs | $ |
| Total fixed costs | $ |
2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year. Enter the final answers rounded to two decimal places.
| Unit variable cost | $ |
| Unit contribution margin | $ |
3. Compute the break-even sales (units) for the
current year. Enter the final answers rounded to the nearest whole
number.
units
4. Compute the break-even sales (units) under
the proposed program for the following year. Enter the final
answers rounded to the nearest whole number.
units
5. Determine the amount of sales (units) that
would be necessary under the proposed program to realize the
$104,000 of income from operations that was earned in the current
year. Enter the final answers rounded to the nearest whole
number.
units
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.
$
8. Based on the data given, would you recommend accepting the proposal?
- In favor of the proposal because of the reduction in break-even point.
- In favor of the proposal because of the possibility of increasing income from operations.
- In favor of the proposal because of the increase in break-even point.
- Reject the proposal because if future sales remain at the current level, the income from operations will increase.
- Reject the proposal because the sales necessary to maintain the current income from operations would be below the current year sales.
Choose the correct answer.
Solutions
ekkarill92 answered 2 years agoRelated Solutions
1. Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 148,400...
1. Break-Even Sales Under Present and Proposed Conditions
Darby Company, operating at full capacity, sold 148,400 units at
a price of $93 per unit during the current year. Its income
statement is as follows:
Sales
$13,801,200
Cost of goods sold
4,898,000
Gross profit
$8,903,200
Expenses:
Selling expenses
$2,449,000
Administrative expenses
1,457,000
Total expenses
3,906,000
Income from operations
$4,997,200
The division of costs between variable and fixed is as
follows:
Variable
Fixed
Cost of goods sold
60%
40%
Selling expenses
50%...
Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 163,500 units...
Break-Even Sales Under Present and Proposed Conditions
Darby Company, operating at full capacity, sold 163,500 units at
a price of $66 per unit during the current year. Its income
statement is as follows
Sales
$10,791,000
Cost of goods sold
3,828,000
Gross profit
$6,963,000
Expenses:
Selling expenses
$1,914,000
Administrative
expenses
1,144,000
Total expenses
3,058,000
Income from operations
$3,905,000
The division of costs between variable and fixed is as
follows:
Variable
Fixed
Cost of goods sold
60%
40%
Selling expenses
50%
50%...
Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 97,700 units...
Break-Even Sales Under Present and Proposed
Conditions
Darby Company, operating at full capacity, sold 97,700 units at a
price of $93 per unit during the current year. Its income statement
is as follows
Sales $9,086,100Cost of goods
sold 3,224,000Gross
profit $5,862,100Expenses: Selling
expenses$1,612,000 Administrative
expenses961,000 Total
expenses 2,573,000Income from
operations $3,289,100
The division of costs between variable and fixed is as
follows:
VariableFixedCost of goods
sold60% 40% Selling
expenses50% 50% Administrative
expenses30% 70%
Management is considering a plant expansion program for the
following year that will permit an increase of $744,000 in yearly...
Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 167,200 units...
Break-Even Sales Under Present and Proposed Conditions Darby
Company, operating at full capacity, sold 167,200 units at a price
of $111 per unit during the current year. Its income statement is
as follows: Sales $18,559,200 Cost of goods sold 6,586,000 Gross
profit $11,973,200 Expenses: Selling expenses $3,293,000
Administrative expenses 1,961,000 Total expenses 5,254,000 Income
from operations $6,719,200 The division of costs between variable
and fixed is as follows: Variable Fixed Cost of goods sold 60% 40%
Selling expenses 50% 50%...
Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 139,000 units...
Break-Even Sales Under Present and Proposed Conditions
Darby Company, operating at full capacity, sold 139,000 units at
a price of $72 per unit during the current year. Its income
statement is as follows:
Sales
$10,008,000
Cost of goods sold
3,552,000
Gross profit
$6,456,000
Expenses:
Selling expenses
$1,776,000
Administrative expenses
1,056,000
Total expenses
2,832,000
Income from operations
$3,624,000
The division of costs between variable and fixed is as
follows:
Variable
Fixed
Cost of goods sold
60%
40%
Selling expenses
50%
50%...
Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 167,200 units...
Break-Even Sales Under Present and Proposed Conditions
Darby Company, operating at full capacity, sold 167,200 units at
a price of $129 per unit during the current year. Its income
statement is as follows:
Sales
$21,568,800
Cost of goods sold
7,654,000
Gross profit
$13,914,800
Expenses:
Selling expenses
$3,827,000
Administrative expenses
2,279,000
Total expenses
6,106,000
Income from operations
$7,808,800
The division of costs between variable and fixed is as
follows:
Variable
Fixed
Cost of goods sold
60%
40%
Selling expenses
50%
50%...
Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 120,200 units...
Break-Even Sales Under Present and Proposed Conditions
Darby Company, operating at full capacity, sold 120,200 units at
a price of $132 per unit during the current year. Its income
statement is as follows:
Sales
$15,866,400
Cost of goods sold
5,632,000
Gross profit
$10,234,400
Expenses:
Selling expenses
$2,816,000
Administrative expenses
1,672,000
Total expenses
4,488,000
Income from operations
$5,746,400
The division of costs between variable and fixed is as
follows:
Variable
Fixed
Cost of goods sold
60%
40%
Selling expenses
50%
50%...
Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 122,850 units...
Break-Even Sales Under Present and Proposed Conditions
Darby Company, operating at full capacity, sold 122,850 units at
a price of $108 per unit during the current year. Its income
statement for the current year is as follows:
Sales
$13,267,800
Cost of goods sold
6,552,000
Gross profit
$6,715,800
Expenses:
Selling expenses
$3,276,000
Administrative expenses
3,276,000
Total expenses
6,552,000
Income from operations
$163,800
The division of costs between fixed and variable is as
follows:
Variable
Fixed
Cost of goods sold
70%
30%...
Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 148,400 units...
Break-Even Sales Under Present and Proposed Conditions
Darby Company, operating at full capacity, sold 148,400 units at
a price of $87 per unit during the current year. Its income
statement is as follows
Sales
$12,910,800
Cost of goods sold
4,582,000
Gross profit
$8,328,800
Expenses:
Selling expenses
$2,291,000
Administrative expenses
1,363,000
Total expenses
3,654,000
Income from operations
$4,674,800
The division of costs between variable and fixed is as
follows:
Variable
Fixed
Cost of goods sold
60%
40%
Selling expenses
50%
50%...
Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 99,700 units...
Break-Even Sales Under
Present and Proposed Conditions
Darby Company,
operating at full capacity, sold 99,700 units at a price of $78 per
unit during the current year. Its income statement is as
follows:
Sales
$7,776,600
Cost of goods sold
2,756,000
Gross profit
$5,020,600
Expenses:
Selling expenses
$1,378,000
Administrative
expenses
832,000
Total expenses
2,210,000
Income from operations
$2,810,600
The division of costs
between variable and fixed is as follows:
Variable
Fixed
Cost of goods sold
60%
40%
Selling expenses
50%
50%...
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