1. Contribution Margin and Contribution Margin Ratio

   For a recent year, Wicker Company-owned restaurants had the following sales and expenses (in millions):

   Sales	$34,600
   Food and packaging	$10,406
   Payroll	8,700
   Occupancy (rent, depreciation, etc.)	9,454
   General, selling, and administrative expenses	5,000
   	$33,560
   Income from operations	$1,040

   Assume that the variable costs consist of food and packaging, payroll, and 40% of the general, selling, and administrative expenses.

   a. What is Wicker Company's contribution margin? Round to the nearest million. (Give answer in millions of dollars.) $ million

   b. What is Wicker Company's contribution margin ratio? Round to one decimal place. %

   c. How much would income from operations increase if same-store sales increased by $2,100 million for the coming year, with no change in the contribution margin ratio or fixed costs? Round your answer to the closest million. $ million

2.

Sales Mix and Break-Even Sales

Dragon Sports Inc. manufactures and sells two products, baseball bats and baseball gloves. The fixed costs are $682,000, and the sales mix is 30% bats and 70% gloves. The unit selling price and the unit variable cost for each product are as follows:

Products	Unit Selling Price		Unit Variable Cost
Bats	$70		$50
Gloves	180		110

a. Compute the break-even sales (units) for both products combined. units

b. How many units of each product, baseball bats and baseball gloves, would be sold at break-even point?

Baseball bats	units
Baseball gloves	units

3.

Break-Even Sales Under Present and Proposed Conditions

Darby Company, operating at full capacity, sold 174,900 units at a price of $90 per unit during the current year. Its income statement is as follows:

Sales			$15,741,000
Cost of goods sold			5,580,000
Gross profit			$10,161,000
Expenses:
Selling expenses	$2,790,000
Administrative expenses	1,680,000
Total expenses			4,470,000
Income from operations			$5,691,000

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 $1,440,000 in yearly sales. The expansion will increase fixed costs by $192,000, 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.

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 $5,691,000 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?