Question

In: Accounting

Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 157,800 units...

Break-Even Sales Under Present and Proposed Conditions

Darby Company, operating at full capacity, sold 157,800 units at a price of $78 per unit during the current year. Its income statement is as follows:

Sales $12,308,400
Cost of goods sold 4,368,000
Gross profit $7,940,400
Expenses:
Selling expenses $2,184,000
Administrative expenses 1,300,000
Total expenses 3,484,000
Income from operations $4,456,400

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

Variable Fixed
Cost of goods sold 60% 40%
Selling expenses 50% 50%
Administrative expenses 30% 70%

Management is considering a plant expansion program for the following year that will permit an increase of $1,014,000 in yearly sales. The expansion will increase fixed costs by $135,200, 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.

Total variable costs $
Total fixed costs $

2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year.

Unit variable cost $
Unit contribution margin $

3. Compute the break-even sales (units) for the current year.
units

4. Compute the break-even sales (units) under the proposed program for the following year.
units

5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $4,456,400 of income from operations that was earned in the current year.
units

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?
$  

8. Based on the data given, would you recommend accepting the proposal?

  1. In favor of the proposal because of the reduction in break-even point.
  2. In favor of the proposal because of the possibility of increasing income from operations.
  3. In favor of the proposal because of the increase in break-even point.
  4. Reject the proposal because if future sales remain at the current level, the income from operations will increase.
  5. Reject the proposal because the sales necessary to maintain the current income from operations would be below the current year sales.

Solutions

Expert Solution

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

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%...
Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 87,750 units...
Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 87,750 units at a price of $99 per unit during the current year. Its income statement for the current year is as follows: Sales $8,687,250 Cost of goods sold 4,290,000 Gross profit $4,397,250 Expenses: Selling expenses $2,145,000 Administrative expenses 2,145,000 Total expenses 4,290,000 Income from operations $107,250 The division of costs between fixed and variable is as follows: Variable Fixed Cost of goods sold 70%   ...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT