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 93,150 units at a price of $66 per unit during the current year. Its income statement for the current year is as follows:

Sales                                      $6,147,900

Cost of goods sold                                           3,036,000

Gross profit                                        $3,111,900

Expenses:                                          

Selling expenses              $1,518,000                          

Administrative expenses              1,518,000                            

Total expenses                                 3,036,000

Income from operations                                               $75,900

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 $528,000 in yearly sales. The expansion will increase fixed costs by $52,800, but will not affect the relationship between sales and variable costs.

5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $75,900 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.
$ Income

Answer 1