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# 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: http://east.cengagenow.com/ilrn/books/wrfe01h/images/ch19/wrfe01h_ch19_pr19_2a.gif The division of costs betweenfixed costsandvariable costsis as follows: http://east.cengagenow.com/ilrn/books/wrfe01h/images/ch19/wrfe01h_ch19_pe19_2a1.gif 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? \$

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?
\$

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