Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Carla Vista Inc. had a bad year in 2021. For the first time in its history. it operated at a loss. The company's income statement
Carla Vista Inc. had a bad year in 2021. For the first time in its history. it operated at a loss. The company's income statement showed the following results from selling 76,800 units of product: net sales $1,920,000; total costs and expenses $2,145,600; and net loss $225,600. Costs and expenses consisted of the following. Total Variable Fixed Cost of goods sold $1,505,280 $1,008,000 $497,280 Selling expenses 496,320 88,320 408,000 Administrative expenses 144,000 55,680 88,320 $2,145,600 $1,152,000 $993,600 Management is considering the following independent alternatives for 2022. 1. Increase unit selling price 25% with no change in costs and expenses. 2. 3. Change the compensation of salespersons from fixed annual salaries totaling $192,000 to total salaries of $38,400 plus a 5% commission on net sales. Purchase new high tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50. (a) Compute the break-even point in sales dollars for 2021. (Round contribution margin ratio to 4 decimal places eg. 0.2512 and final - answer to 0 decimal places, e.g. 2.510) Break even point $ (b) Compute the break-even point in sales dollars under each of the alternative courses of action for 2022. (Round contribution ma ratio to 3 decimal places eg. 0.251 and final answers to O decimal places, e.g. 2,510.) Break-even point 1. Increase selling price $ 2 Change compensation $ 3. Purchase machinery $ Which course of action do you recommend
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started