Portmann Company, operating at full capacity, sold 1,000,00
Portmann Company, operating at full capacity, sold 1,000,000 units… Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $190 per unit during the current year. Its income statement is as follows: Sales $190,000,000 Cost of goods sold (100,000,000)Gross profit $90,000,000 Expenses: Selling expenses$14,000,000 Administrative expenses19,000,000 Total expenses (33,000,000)Operating income $57,000,000The division of costs between variable and fixed is as follows: VariableFixedCost of goods sold70% 30% Selling expenses75% 25% Administrative expenses50% 50% Management is considering a plant expansion program for the following year that will permit an increase of $11,400,000 in yearly sales. The expansion will increase fixed costs by $4,500,000 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._________________ units4. Compute the break-even sales (units) under the proposed program for the following year._________________ units5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $57,000,000 of operating income that was earned in the current year._________________ units6. 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 income or loss be for the following year?_________________ . Accounting Business Financial Accounting ACC 201
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