Howard Industries Inc., operating at full capacity, sold 64,000 units at a price of $45 per unit during 2014. Its income statement for 2014 is as follows:
The division of costs between variable and fixed is as follows:
Management is considering a plant expansion program that will permit an increase of $900,000 in yearly sales. The expansion will increase fixed costs by $212,500, but will not affect the relationship between sales and variable costs.