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Cost of good sold 40% 50% 60% 50% Selling expenses Administrative expenses 70% 30% Management is considering plant expansion program that will permit an increase of $783,000 (9,000 units at $87 per unit) in yearly sales. The expansion will increase feed costs by $104,400, but will not affect the relationship between sales and variable costs Instructions: 1. Determine for 2015 the total fixed costs and the total variable costs. Total wed costs Total variable costs 2. Determine for 2015 (1) the unit variable cost and (b) the unit contribution margin . Unit variable cost per un b. Unit contribution margin per un 3. compute the break-even sales (units) for 2015 units 4. Compute the break even sales (units) under the proposed program units 5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $3.607.600 of income from operations that was earned in 20YS. unts 6. Determine the maximum operating income possible with the expanded plant. 7. If the proposal is accepted and sales remain at the 2015 level, what will be the operating income or loss for 2016? Income Break-Even Sales Under Present and Proposed Conditions Kearney Company, operating at full capacity, sold 114,000 units at a price of 507 per unit during 2015. It income statement for 2015 is as follows: Sales $9,987,600 Cost of goods sold (3,538,000) Gross profit $6,449,600 Expenses Selling expenses $1,769,000 1,073,000 Administrative expenses Total expenses (2.842,000) Income from operations $3,607,600 The division of costs between fixed and variable is as follows: Fixed Variable Cost of good sold 40% 60% Selling expenses 50 50 Administrative expenses 70% 10%

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