Tanek Corp.'s sales slumped badly in 2020. For the first time in its history, it operated at

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Tanek Corp.'s sales slumped badly in 2020. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 500,000 units of product: sales $2,500,000, total costs and expenses $2,600,000, and net loss $100,000. Costs and expenses consisted of the amounts shown below.

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Management is considering the following independent alternatives for 2021.

1. Increase unit selling price 20% with no change in costs, expenses, and sales volume.

2. Change the compensation of salespersons from fixed annual salaries totaling $150,000 to total salaries of $60,000 plus a 5% commission on sales.

Instructions

a. Compute the break-even point in dollars for 2020.

b. Compute the break-even point in dollars under each of the alternative courses of action. (Round all ratios to nearest full percent.) Which course of action do you recommend?

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Related Book For  book-img-for-question

Financial and Managerial Accounting

ISBN: 978-1119392132

3rd edition

Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso

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