Question
Crane Inc. had a bad year in 2022. For the first time in its history, it operated at a loss. The companys income statement showed
Crane Inc. had a bad year in 2022. For the first time in its history, it operated at a loss. The companys income statement showed the following results from selling 75,000 units of product: net sales $1,500,000; total costs and expenses $1,780,200; and net loss $280,200. Costs and expenses consisted of the following.
Total | Variable | Fixed | ||||
Cost of goods sold | $1,106,000 | $598,000 | $508,000 | |||
Selling expenses | 522,200 | 95,000 | 427,200 | |||
Administrative expenses | 152,000 | 57,000 | 95,000 | |||
$1,780,200 | $750,000 | $1,030,200 |
Compute the break-even point in dollars under each of the alternative courses of action for 2023. (Round contribution margin ratio to 3 decimal places e.g. 0.251 and final answers to 0 decimal places, e.g. 2,510.)
Management is considering the following independent alternatives for 2023.
Increase unit selling price 25% with no change in costs and expenses.
Change the compensation of salespersons from fixed annual salaries totaling $200,000 to total salaries of $40,010 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.
Question 1
(a) Compute the break-even point in dollars for 2022. (Round contribution margin ratio to 2 decimal places e.g. 0.25 and final answer to 0 decimal places, e.g. 2,510.)
----------------$2,060,400.00?-------------
Question 2
Compute the break-even point in dollars under each of the alternative courses of action for 2023. (Round contribution margin ratio to 3 decimal places e.g. 0.251 and final answers to 0 decimal places, e.g. 2,510.)
Enter your answer in the following format: 1. $x,xxx,xxx 2. $x,xxx,xxx 3. $x,xxx,xxx
Question 3
Which alternative do you recommend?
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