Tanek Corp.’s sales slumped badly in 2017. For the first time in its history, it operated at a loss. The company’s income statement showed the following results from selling 525,500 units of product: sales $2,627,500, total costs and expenses $2,732,600, and net loss $105,100. Costs and expenses consisted of the amounts shown below.

		Total		Variable		Fixed
Cost of goods sold		$2,249,140		$1,671,090		$578,050
Selling expenses		262,750		96,692		166,058
Administrative expenses		220,710		71,468		149,242
		$2,732,600		$1,839,250		$893,350

Management is considering the following independent alternatives for 2018.

1.		Increase unit selling price 25% with no change in costs, expenses, and sales volume.
2.		Change the compensation of salespersons from fixed annual salaries totaling $157,650 to total salaries of $63,060 plus a 6% commission on sales.

(a) Compute the break-even point in dollars for 2017. (Round final answer to 0 decimal places, e.g. 1,225.)

Break-even point

$

(b) Compute the contribution margin under each of the alternative courses of action. (Round final answer to 0 decimal places, e.g. 1,225.)

Contribution margin for alternative 1		%
Contribution margin for alternative 2		%

Compute the break-even point in dollars under each of the alternative courses of action. (Round selling price per unit to 2 decimal places, e.g. 5.25 and other calculations to 0 decimal places, e.g. 20% and also final answer to 0 decimal places, e.g. 1,225.)

Break-even point for alternative 1		$
Break-even point for alternative 2		$

Which course of action do you recommend?

Answer rating: 100% (QA)

1 Sales price26275005255005 per unit If unit selling price increase 25 525 of 5 5125 625 Total sales ... View the full answer