Blossom Corp.s sales slumped badly in 2020. For the first time in its history, it operated at a loss. The companys income statement showed the following results from selling 505,500 units of product: sales $2,527,500, total costs and expenses $2,611,625, and net loss $84,125. Costs and expenses consisted of the amounts shown below.

		Total		Variable		Fixed
Cost of goods sold		$2,146,565		$1,733,865		$412,700
Selling expenses		252,750		93,012		159,738
Administrative expenses		212,310		68,748		143,562
		$2,611,625		$1,895,625		$716,000

Management is considering the following independent alternatives for 2021.

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 $151,650 to total salaries of $60,660 plus a 5% commission on sales.

Compute the break-even point in dollars for 2020.

Break-even point

$

Compute the contribution margin under each of the alternative courses of action.

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.

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

Which course of action do you recommend? Alternative 1Alternative 2