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# Break-Even Sales Under Present and Proposed Conditions Howard Industries Inc., operating at full capacity, sold 64,000...

###### Question:

Break-Even Sales Under Present and Proposed Conditions

Howard Industries Inc., operating at full capacity, sold 64,000 units at a price of $45 per unit during the current year. Its income statement is as follows:  Sales$2,880,000 Cost of goods sold 1,400,000 Gross profit $1,480,000 Expenses: Selling expenses$400,000 Administrative expenses 387,500 Total expenses 787,500 Income from operations $692,500 The division of costs between variable and fixed is as follows:  Variable Fixed Cost of goods sold 75% 25% Selling expenses 60% 40% Administrative expenses 80% 20% Management is considering a plant expansion program for the following year that will permit an increase of$900,000 in yearly sales. The expansion will increase fixed costs by $212,500 but will not affect the relationship between sales and variable costs. Required: 1. Determine the total fixed costs and the total variable costs for the current year.  Total variable costs$ 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. units 4. Compute the break-even sales (units) under the proposed program for the following year. units 5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the$692,500 of income from operations that was earned in the current year.
units

6. Determine the maximum income from operations possible with the expanded plant.
$7. If the proposal is accepted and sales remain at the current level, what will the income or loss from operations be for the following year?$

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