Break-Even Sales Under Present and Proposed Conditions Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $189 per unit during the current year. Its income statement is as follows: Sales $189,000,000
Cost of goods sold (100,000,000)
Gross profit $89,000,000
Expenses:
Selling expenses $16,000,000
Administrative expenses 14,000,000
Total expenses (30,000,000)
Operating income $59,000,000

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

Variable Fixed
Cost of goods sold 70% 30%
Selling expenses 75% 25%
Administrative expenses 50% 50%

Management is considering a plant expansion program for the following year that will permit an increase of $9,450,000 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:
a. Determine the total variable costs and the total fixed costs for the current year.
b. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year.
c. Compute the break-even sales (units) for the current year.
d. Determine the maximum operating income possible with the expanded plant.