Battonkill Company, operating at full capacity, sold 154,100units at a price of $48 per unit during the current year. Itsincome statement for the current year is as follows:
Sales $7,396,800 Cost of goods sold 2,624,000 Gross profit $4,772,800 Expenses: Selling expenses $1,312,000 Administrativeexpenses 784,000 Total expenses 2,096,000 Income from operations $2,676,800
The division of costs between fixed and variable is asfollows:
Fixed Variable Cost of goods sold 40% 60% Selling expenses 50% 50% Administrative expenses 70% 30%
Management is considering a plant expansion program that willpermit an increase of $576,000 in yearly sales. The expansion willincrease fixed costs by $76,800, but will not affect therelationship between sales and variable costs.
Required:
1. Determine for the current year the totalfixed costs and the total variable costs.
Total fixed costs $ Total variable 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 thecurrent year.
units
4. Compute the break-even sales (units) underthe proposed program.
units
5. Determine the amount of sales (units) thatwould be necessary under the proposed program to realize the$2,676,800 of income from operations that was earned in the currentyear.
units
6. Determine the maximum income from operationspossible with the expanded plant.
$
7. If the proposal is accepted and sales remainat the current level, what will the income or loss from operationsbe for the following year?
$ Income
Battonkill Company, operating at full capacity, sold 154,100units at a price of $48 per unit during the current year. Itsincome statement for the current year is as follows:
Sales | $7,396,800 | ||
Cost of goods sold | 2,624,000 | ||
Gross profit | $4,772,800 | ||
Expenses: | |||
Selling expenses | $1,312,000 | ||
Administrativeexpenses | 784,000 | ||
Total expenses | 2,096,000 | ||
Income from operations | $2,676,800 |
The division of costs between fixed and variable is asfollows:
Fixed | Variable | |||
Cost of goods sold | 40% | 60% | ||
Selling expenses | 50% | 50% | ||
Administrative expenses | 70% | 30% |
Management is considering a plant expansion program that willpermit an increase of $576,000 in yearly sales. The expansion willincrease fixed costs by $76,800, but will not affect therelationship between sales and variable costs.
Required:
1. Determine for the current year the totalfixed costs and the total variable costs.
Total fixed costs | $ |
Total variable 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 thecurrent year.
units
4. Compute the break-even sales (units) underthe proposed program.
units
5. Determine the amount of sales (units) thatwould be necessary under the proposed program to realize the$2,676,800 of income from operations that was earned in the currentyear.
units
6. Determine the maximum income from operationspossible with the expanded plant.
$
7. If the proposal is accepted and sales remainat the current level, what will the income or loss from operationsbe for the following year?
$ Income