Break-Even Sales Under Present and Proposed Conditions Portmann Company, operating at full capacity, sold 1,000,000...
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Accounting
Break-Even Sales Under Present and Proposed Conditions
Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $189 per unit during the current year. Its income statement is as follows:
Sales
$189,000,000
Cost of goods sold
(99,000,000)
Gross profit
$90,000,000
Expenses:
Selling expenses
$16,000,000
Administrative expenses
15,400,000
Total expenses
(31,400,000)
Operating income
$58,600,000
The division of costs between variable and fixed 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 for the following year that will permit an increase of $11,340,000 in yearly sales. The expansion will increase fixed costs by $5,000,000 but will not affect the relationship between sales and variable costs.
Required:
6. Determine the maximum operating income possible with the expanded plant. $fill in the blank 8
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