The fields in yellow require an answer. Thank you. Obj. 2.3PR 6-2A Break-even sales under present and proposed conditionsPortmann Company operating at full capacity, sold 1.000.000 units at a price of $188 per unitduring the current year. Its income statement is as follows:Sales....$ 188,000,000(100,000,000)Cost of goods soldGross profit...$ 88,000,000Expenses:Selling expenses.....$16,000,000Administrative expenses... 12,000,000Total expenses..(28,000,000)Operating income.60,000,000The division of costs between yariable and fixed is as follows:VariableFixedZ0%30%Cost of goods soldSelling expensesZ5%25%Administrative expenses50%50%Management is considering a plant expansion program for the following year that will permitan increase of $11,280,000 in yearly sales. The expansion will increase fixed costs by $5,000,000but will not affect the relationship between sales and variable costs.Instructions1. Determine the total variable costs and the total fixed costs for the current year.2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year.3. Compute the break-even sales (units) for the current year.4. Compute the break-even sales (units) under the proposed program for the following year.5. Determine the amount of sales (units) that would be necessary under the proposed program torealize the $60,000,000 of operating income that was earned in the current year.6. Determine the maximum operating income possible with the expanded plant.7. If the proposal is accepted and sales remain at the current level, what will the operating in-come or loss be for the following year?8.Based on the data given, would you recommend accepting the proposal? Explain.ABCDE1Bee Gee CompanyIncome Statement23For the Year Ended December 31, 20214Actual5$ 199,280,000670,000,0007$ 129,280,0008$ 12,000,0006,000,00018,000,000$ 111,280,000FixedSalesCost of goods soldGross profitOperating Expenses:Selling expensesAdministrative expensesTotal operating expenses9101112Income from operations131415Division of costs between variable and fixed:16Variable17Cost of goods sold70%18Selling expenses75%19Administrative expenses50%2021Fixed costs of goods sold$ 21,000,00022Fixed selling expenses3,000,0003,000,00023Fixed administrative expenses24Total fixed costs$ 27,000,0002526Variable cost of goods sold$ 49,000,00027Variable selling expenses9,000,0003,000,00028Variable administrative expenses29Total variable costs$ 61,000,0003031Total fixed and variable costs$ 88,000,0003288,000,000Total costs from income statementCheck figure3334352 Total variable costs$ 61,000,00036Units soldABD37 a. Unit variable cost3839Total sales40Units sold41Sales per unit42Variable cost per unit43 b. Unit contribution margin44453 Total fixed costs46Unit contribution margin47Break-even sales (units)4849Current fixed cost50Proposed increase51Proposed fixed cost52343553Unit contribution margin5455Proposed break even sales (units)565757 5 Proposed fixed costsTarget profit5859606162 Targeted sales (units)6364 6 Current sales6566676869707172737475767778 879Unit contribution marginMaximum sales increaseMaximum proposes sales (dollars)Variable costsContribution marginProposed fixed costsMaximum income from operations7 Current salesVariable costsContribution marginProposed fixed costsIncome from operationsс#DIV/0!$ 199,280,000#DIV/0!#DIV/0!#DIV/0!$ 27,000,000#DIV/0!#DIV/0!$ 27,000,000$ 27,000,000#DIV/0!#DIV/0!$ 27,000,000$ 111,280,000#DIV/0!#DIV/0!$ 199,280,000199,280,000#DIV/0!#DIV/0!27,000,000#DIV/0!$ 199,280,000#DIV/0!#DIV/0!27,000,000#DIV/0!#DIV/0!30%25%50%Check figure (s/b0)EFGContribution margin ratio

Obj. 2.3 PR 6-2A Break-even sales under present and proposed conditions Portmann Company, operating at full capacity, sold 1.000.000 units at a price of $188 per unit during the current year. Its income statement is as follows: Sales.... Cost of goods sold $ 188,000,000 (100,000,000) $ 88,000,000 Gross profit.. Expenses: Selling expenses.. $16,000,000 Administrative expenses... 12,000,000 Total expenses (28,000,000) $ 60,000,000 Operating income.. The division of costs between variable and fixed is as follows: Variable Fixed Cost of goods sold 70% 30%

Obj. 2.3 PR 6-2A Break-even sales under present and proposed conditions Portmann Company, operating at full capacity, sold 1.000.000 units at a price of $188 per unit during the current year. Its income statement is as follows: Sales.... Cost of goods sold $ 188,000,000 (100,000,000) $ 88,000,000 Gross profit.. Expenses: Selling expenses.. $16,000,000 Administrative expenses... 12,000,000 Total expenses (28,000,000) $ 60,000,000 Operating income.. The division of costs between variable and fixed is as follows: Variable Fixed Cost of goods sold 70% 30%

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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