Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Darby Company, operating at full capacity, sold 79,650 units at a price of $99 per unit during the current year. Its income statement for the

image text in transcribedimage text in transcribed

Darby Company, operating at full capacity, sold 79,650 units at a price of $99 per unit during the current year. Its income statement for the current year is as follows: Sales Cost of goods sold Gross profit $7,885,350 3,894,000 $3,991,350 Expenses: Selling expenses $1,947,000 Administrative expenses 1,947,000 Total expenses 3,894,000 Income from operations $97,350 The division of costs between fixed and variable is as follows: Variable Fixed Cost of goods sold Selling expenses Administrative expenses 70% 30% 75% 25% 50% 50% Management is considering a plant expansion program that will permit an increase of $594,000 in yearly sales. The expansion will increase fixed costs by $59,400, but will not affect the relationship between sales and variable costs. 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 units 5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $97,350 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. 8. Based on the data given, would you recommend accepting the proposal? a. In favor of the proposal because of the reduction in break-even point. b. In favor of the proposal because of the possibility of increasing income from operations. c. In favor of the proposal because of the increase in break-even point. d. Reject the proposal because if future sales remain at the current level, the income from operations will increase e. Reject the proposal because the sales necessary to maintain the current income from operations would be below the current year sales. Choose the correct

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Clinical Audit In Primary Care Demonstrating Quality And Outcomes

Authors: Ruth Chambers, Gill Wakley

1st Edition

1857757092, 978-1857757095

More Books

Students also viewed these Accounting questions