Cruz Manufacturing Ltd’s sales slumped badly in 2015. 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:

	Total	Variable	Fixed
Cost of sales	$2 100 000	$1 440 000	$660 000
Selling expenses	300 000	72 000	228 000
Administrative expenses	210 000	48 000	162 000
	$2 610 000	$1 560 000	$1 050 000

Management is considering the following independent alternatives for 2016:

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.

Required

A. Calculate the break-even point in dollars for 2015 and each of the three alternatives.

B. Which course of action to you recommend?