Question

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:

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:

cost of goods sold: variable 70%, fixed 30%
selling expenses: variable 75%, fixed 25%
administrative expenses: variable 50%, fixed 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.

Explanation:

Calculate total variable costs for the current year

Using the Variable Cost and Cost Classification knowledge points

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Calculate total fixed costs for the current year

Using the Fixed Cost and Cost Classification knowledge points

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Answer:

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

Total variable costs: <blank>\$88,000,000</blank>
Total fixed costs: <blank>\$40,000,000</blank>