Break-Even 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 betweenfixed costsandvariable costsis 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) theunit contribution margin.

Unit variable cost: | $ |

Unit contribution margin: | $ |

**3. **Compute the break-even sales (units) for 2012.

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 $1,100,000 of income from operations that was earned in 2012.

units

**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?

$