Guillen Manufacturing had a bad year in 2011, operating at a loss for the first time in its history. The company's income statement showed the following results from selling 200,000 units of product: net sales $2,000,000; total costs and expenses $2,120,000; and net loss $120,000. Costs and expenses consisted of the following.

Management is considering the following independent alternatives for 2012.
1. Increase unit selling price 30% with no change in costs and expenses.
2. Change the compensation of salespersons from fixed annual salaries totaling $170,000 to total salaries of $50,000 plus a 6% 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 40:60.

Instructions
(a) Compute the break-even point in dollars for 2011.
(b) Compute the break-even point in dollars under each of the alternative courses of action. Which course of action do you recommend? Round to the nearest dollar.

Fixed TotalVariable Cost of goods sold Seling expenses Administrative expenses $1,295,000 975,000 $320,000 250,000 150,000 575,000 250,000 325,000 100,000 $2,120,000 $1,400,000 $720,000