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 106,650 units at a price of $45 per unit during the current year. Its income statement for the current year is as follows: Sales $4,799,250 Cost of goods sold 2,370,000 Gross profit $2,429,250 Expenses: Selling expenses $1,185,000 Administrative expenses 1,185,000 Total expenses 2,370,000 Income from operations $59,250 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 $450,000 in yearly sales. The expansion will increase fixed costs by $45,000, 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 $fill in the blank 1 Total fixed costs $fill in the blank 2 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 $fill in the blank 3 Unit contribution margin $fill in the blank 4 3. Compute the break-even sales (units) for the current year. Enter the final answers rounded to the nearest whole number. fill in the blank 5 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. fill in the blank 6 units 5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $59,250 of income from operations that was earned in the current year. Enter the final answers rounded to the nearest whole number. fill in the blank 7 units 6. Determine the maximum income from operations possible with the expanded plant. Enter the final answer rounded to the nearest dollar. $fill in the blank 8 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. $fill in the blank 9 Income 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.

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 106,650 units at a price of $45 per unit during the current year. Its income statement for the current year is as follows: Sales $4,799,250 Cost of goods sold 2,370,000 Gross profit $2,429,250 Expenses: Selling expenses $1,185,000 Administrative expenses 1,185,000 Total expenses 2,370,000 Income from operations $59,250 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 $450,000 in yearly sales. The expansion will increase fixed costs by $45,000, 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 $fill in the blank 1 Total fixed costs $fill in the blank 2 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 $fill in the blank 3 Unit contribution margin $fill in the blank 4 3. Compute the break-even sales (units) for the current year. Enter the final answers rounded to the nearest whole number. fill in the blank 5 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. fill in the blank 6 units 5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $59,250 of income from operations that was earned in the current year. Enter the final answers rounded to the nearest whole number. fill in the blank 7 units 6. Determine the maximum income from operations possible with the expanded plant. Enter the final answer rounded to the nearest dollar. $fill in the blank 8 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. $fill in the blank 9 Income 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.

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter22: Master Budget (master)

Section: Chapter Questions

Problem 1R: Ranger Industries has provided the following information at June 30: Other information: Average...

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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 106,650 units at a price of $45 per unit during the current year. Its income statement for the current year is as follows:

Sales		$4,799,250
Cost of goods sold		2,370,000
Gross profit		$2,429,250
Expenses:
Selling expenses	$1,185,000
Administrative expenses	1,185,000
Total expenses		2,370,000
Income from operations		$59,250

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 $450,000 in yearly sales. The expansion will increase fixed costs by $45,000, 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	$fill in the blank 1
Total fixed costs	$fill in the blank 2

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	$fill in the blank 3
Unit contribution margin	$fill in the blank 4

3. Compute the break-even sales (units) for the current year. Enter the final answers rounded to the nearest whole number.
fill in the blank 5 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.
fill in the blank 6 units

5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $59,250 of income from operations that was earned in the current year. Enter the final answers rounded to the nearest whole number.
fill in the blank 7 units

6. Determine the maximum income from operations possible with the expanded plant. Enter the final answer rounded to the nearest dollar.
$fill in the blank 8

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.
$fill in the blank 9 Income

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.
b

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