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# Break­Even Sales Under Present and Proposed Conditions Armstrong Company, operating at full capacity, sold 80,000 units at a price of \$124 per unit during 2012. Its income statement for 2012 is as follows: The division of costs between fixed costs and variable costs is as follows: Management is considering a plant expansion program that will permit an increase of \$2,480,000 in yearly sales. The expansion will increase fixed costs by \$272,000, but will not affect the relationship between sales and variable costs. Instructions: 1. Determine for 2012 the total fixed costs and the total variable costs. Total fixed costs: \$ Total variable costs: \$ 2. Determine for 2012 (a) the unit variable cost and (b) the unit contribution margin. Unit variable cost: \$ Unit contribution margin: \$ 3. Compute the break­even sales (units) for 2012. units 4. Compute the break­even sales (units) under the proposed program. 5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the \$1,100,000 of income from operations that was earned in 2012. 6. Determine the maximum income from operations possible with the expanded plant. \$ 7. If the proposal is accepted and sales remain at the 2012 level, what will the income or loss from operations be for 2013?

Break­Even Sales Under Present and Proposed Conditions
Armstrong Company, operating at full capacity, sold 80,000 units at a price of \$124 per unit during 2012. Its income statement for 2012 is as follows:

The division of costs between fixed costs and variable costs is as follows:

Management is considering a plant expansion program that will permit an increase of \$2,480,000 in yearly sales. The expansion will increase fixed costs by \$272,000, but will not affect the relationship between sales and variable costs.
Instructions:
1. Determine for 2012 the total fixed costs and the total variable costs.
Total fixed costs: \$

Total variable costs: \$

2. Determine for 2012 (a) the unit variable cost and (b) the unit contribution margin.
Unit variable cost: \$
Unit contribution margin: \$

3. Compute the break­even sales (units) for 2012. units
4. Compute the break­even sales (units) under the proposed program.

5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the \$1,100,000 of income from operations that was earned in 2012.

6. Determine the maximum income from operations possible with the expanded plant. \$
7. If the proposal is accepted and sales remain at the 2012 level, what will the income or loss from operations be for 2013?

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