Break-Even Sales Under Present and Proposed Conditions Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $186 per unit during the current year. Its income statement is as follows: Sales Cost of goods sold Gross profit Expenses: $14,000,000 Administrative expenses 12,400,000 Total expenses Selling expenses Cost of goods sold Selling expenses Operating income The division of costs between variable and fixed is as follows: Variable Fixed 30% 25% 70% 75% Total fixed costs $186,000,000 (99,000,000) $87,000,000 Administrative expenses Management is considering a plant expansion program for the following year that will permit an increase of $11,160,000 in yearly sales. The expansion will increase fixed costs bv $4.500.000 but will not affect the relationship between sales and variable costs. Required: (26,400,000) $60,600,000 50% 1. Determine the total variable costs and the total fixed costs for the current year. Total variable costs 86,000,000 units 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 50% 86 100 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 $60,600,000 of operating income that wa earned in the current year.
Break-Even Sales Under Present and Proposed Conditions Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $186 per unit during the current year. Its income statement is as follows: Sales Cost of goods sold Gross profit Expenses: $14,000,000 Administrative expenses 12,400,000 Total expenses Selling expenses Cost of goods sold Selling expenses Operating income The division of costs between variable and fixed is as follows: Variable Fixed 30% 25% 70% 75% Total fixed costs $186,000,000 (99,000,000) $87,000,000 Administrative expenses Management is considering a plant expansion program for the following year that will permit an increase of $11,160,000 in yearly sales. The expansion will increase fixed costs bv $4.500.000 but will not affect the relationship between sales and variable costs. Required: (26,400,000) $60,600,000 50% 1. Determine the total variable costs and the total fixed costs for the current year. Total variable costs 86,000,000 units 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 50% 86 100 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 $60,600,000 of operating income that wa earned in the current year.
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter6: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 11E
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