Question: Please help me understand how to answer #6 (at the bottom). Please show your work. I have gotten all other questions correct but I can't
Please help me understand how to answer #6 (at the bottom). Please show your work. I have gotten all other questions correct but I can't figure this one out. Thank you.
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 116,100 units at a price of $132 per unit during the current year. Its income statement for the current year is as follows:
| Sales | $15,325,200 | ||
| Cost of goods sold | 7,568,000 | ||
| Gross profit | $7,757,200 | ||
| Expenses: | |||
| Selling expenses | $3,784,000 | ||
| Administrative expenses | 3,784,000 | ||
| Total expenses | 7,568,000 | ||
| Income from operations | $189,200 |
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 $1,188,000 in yearly sales. The expansion will increase fixed costs by $118,800, but will not affect the relationship between sales and variable costs.
6. Determine the maximum income from operations possible with the expanded plant. Enter the final answer rounded to the nearest dollar.
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
