Company completed the 2022 fiscal period (January 1- December 31) and through management analysis and review of the income statement the following information was determined:

Sales Revenue of $1,578,500 based on sales of 225,500 units.

Cost of Goods Sold totaled $1,014,750.

70% of COGS (Cost of Goods Sold) are variable.

Selling Expenses totaled $410,000.

45% of selling expenses are variable

Administrative Expenses totaled $189,300

40% of administrative expenses are variable

Instructions

Round all costs per unit to 2 decimals

FINAL break-even answers to the unit and dollar (no decimals).

DO NOT Round the contribution margin ratio.

You will NOT maintain the same percentages of variable vs. fixed costs in each of the proposed plans.

Part 1. Using the information above prep, income statement, determine net income (loss) and compute the break-even point in total sales dollars and in units for 2022.

Prepare a CVP income statement format for Part 2 (plans A and B).

Part 2.

PLAN A - Employee 1 has proposed a plan to improve its profitability. Employee 1 feels that the quality of the final product could be substantially improved by spending $0.23 more per unit on higher quality raw materials. The selling price per unit could be increased to $7.35. Employee 1 projects that sales volume will increase by 22%. Compute net income under Employee 1's proposal and the break-even point in units and sales dollars.

(DO NOT Round the contribution margin ratio.)

PLAN B - Employee 2 was a sales and marketing major in college. Employee 2believes sales volume can be increased by using an intensive online advertising and social media promotional campaign. She proposed the following plan as an alternative to Employee 1 (1) improve sales incentives by increasing sales commission for each sale, this will increase the following variable costs: cost of goods sold to $3.16/per unit, selling expenses to $0.85/per unit, administrative expenses to $0.55/per units, (2) increase the selling price per unit by $0.57, and (3) increase fixed selling expenses by $45,840. Employee 2 based her recommendations on a marketing research report that suggested that sales volume would increase by 21% if these changes were made. Compute net income under Employee 2 proposal and the break-even point in unit and sales dollars.

(DO NOT Round the contribution margin ratio.)

Part 3.

Which plan do you believe should be accepted and why?