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:
Line Item Description Amount Amount
Sales $188,000,000
Cost of goods sold (100,000,000)
Gross profit $88,000,000
Expenses:
Selling expenses $16,000,000
Administrative expenses 12,000,000
Total expenses (28,000,000)
Operating income $60,000,000

The division of costs between variable and fixed is as follows:
Line Item Description 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 $11,280,000 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:

1. Determine the total variable costs and the total fixed costs for the current year.
Total variable costs
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$
Total fixed costs
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$

2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year.
Unit variable cost
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$
Unit contribution margin
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$

3. Compute the break-even sales (units) for the current year.
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units

4. Compute the break-even sales (units) under the proposed program for the following year.
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units

5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $60,000,000 of operating income that was earned in the current year.
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units

6. Determine the maximum operating income possible with the expanded plant.
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$

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?
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$
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