Cruz Manufacturing Ltd’s sales slumped badly in 2025. For the first time in its history, it operated at a loss. The company’s income statement showed the following results from selling 600 000 units of product: Net sales \($2\) 400 000; total costs and expenses \($2\) 610 000; and loss \($210\) 000. Costs and expenses consisted of the following.

Required
(a) Calculate the break-even point in dollars for 2026 for each of the three alternatives.
(b) Which course of action to you recommend?

Transcribed Image Text:

Cost of sales Selling expenses Administrative expenses Total $2100000 300 000 210000 $2610000 Variable $1440000 72 000 Fixed $ 660000 228000 48 000 $1560000 162000 $1050000 Management is considering the following independent alternatives for 2026: 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 totalling $210 000 to total salaries of $70 000 plus a 3% commission on net sales 3. purchase new high-tech machinery that will change the proportion of cost of sales to 55% of net sales variable and fixed cost of goods to $767 748 in total.