Battonkill Company, operating at full capacity, sold 146,700 units at a price of

Question

Battonkill Company, operating at full capacity, sold 146,700 units at a price of $48 per unit during 2010. Its income statement for 2010 is as follows:

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

Management is considering a plant expansion program that will permit an increase of $576,000 in yearly sales. The expansion will increase fixed costs by $76,800, but will not affect the relationship between sales and variable costs.

If the proposal is accepted and sales remain at the 2010 level, what will the income or loss from operations be for 2011?
$ income/loss

Sales $7,041,600 Cost of goods sold 2,496,000 Gross profit $4,545,600 Expenses: Selling expenses $1,248,000 Administrative expenses 752,000 Total expenses 2,000,000 Income from operations $2,545,600

Explanation / Answer

sales havent changed and the variable costs havent changed. Fixed costs arent a part of operating expenses. so the net income from operations will be the same as the previous year = 2545600

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