Question

Question 3 Your answer is partially correct. Try again. Midlands Inc. had a bad year in 2019. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 77,000 units of product: net sales $1,540,000; total costs and expenses $1,636,000; and net loss $96,000. Costs and expenses consisted of the following. Total Variable Fixed Cost of goods sold Selling expenses Administrative expenses $962,800 524,200 149,000 $1,636,000 $466,000 94,000 56,000 $616,000 $496,800 430,200 93,000 $1,020,000 Management is considering the following independent alternatives for 2020. 1. Increase unit selling price 25% with no change in costs and expenses. 2. Change the compensation of salespersons from fixed annual salaries totaling $197,000 to total salaries of $40,005 plus a 5% commission on net sales. 3. Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50. (a) Compute the break-even point in dollars for 2019. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and final answer to 0 decimal places, e.g. 2,510.) Break-even point T 1700000 (b) Compute the break-even point in dollars under each of the alternative courses of action for 2020. (Round contribution margin ratio to 3 decimal places e.g. 0.251 and final answers to 0 decimal places, e.g. 2,510.)

Answer 1

Answers A) Break Even Point in Dollars 1700000 B) 1) increasing Selling Price 1500000 2) Change Compensation 1569100 3) Purchase Machinery 1702712 Whichcourse of Action Do you recommend Increasing Selling Price , alternative 1

Data total 962800 524200 149000 1636000 Cost of goods Sold Selling Expenses Administrative Expenses total Sales Revneue Less:Varaible Cost Contribution Margin Less: Fixed Cost Net Loss Variable Fixed 466000496800 94000 430200 56000 93000 616000 1020000 1540000 616000 924000 1020000 -96000 Break Even Dollars = Fixed Cost / CM Ratio CM Ratio = Contribution Margin / Sales CM Ratio = 924000/1540000 Break Even Dollars =1020000/60% 60% 1700000

IF Units Selling Price is Increased by25% Sales Revneue = (1540000*1.25)) 1925000 Less:Varaible Cost 616000 Contribution Margin 1309000 CM Ratio = 1309000/1925000 68.00% Break Even Dollars =1020000/68% 1500000 Compensations to Sales Persona from Fixed Annula Salaries to 40,005 Plus 5% Common on net Sales Total Variable Fixed Reveised cost Data Cost of goods Sold 962800| 466000| 496800| Selling Expenses 444205171000 273205 Administrative Expenses 149000 56000 93000 1556005693000 863005 Sales Revneue 1540000 Less:Varaible Cost 693000 Contribution Margin 847000 CM Ratio -847000/154000 55.00% Break Even Dollars =863005/55% 1569100 total

Change the Proportion of Cost of good sold of Variable and Fixed into 50:50 Reveised cost Data Total Variable Fixed Cost of goods Sold 962800| 481400 481400 Selling Expenses 524200 94000 430200 Administrative Expenses 149000 56000 93000 total 1636000 631400 1004600 Sales Revenue 1540000 Less:Varaible Cost 631400 Contribution Margin 908600 CM Ratio = 9086000/1540000 59.00% Break Even Dollars =1004600/59% 1702712