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Cruz Manufacturing had a bad year in 2010. For the first time in its history it operated at a loss. The company's income statement showed
Cruz Manufacturing had a bad year in 2010. For the first time in its history it operated at a loss. The company's income statement showed the following results from selling 82,000 units of product: Net sales $1,604,419; total costs and expenses $1,749,200; and net loss $144,781. Costs and expenses consisted of the following. total / variable/ fixed Cost of goods sold $1,208,200 $784,900 $423,300 Selling expenses 420,900 74,800 346,100 Admin expenses 120,100 49,600 70,500 1,749,200 909,300 839,900 Management is considering the following independent alternatives for 2011. 1. Increase unit selling price 22% with no change in costs and expenses. 2.Change the compensation of salespersons from fixed annual salaries totaling $201,200 to total salaries of $37,500 plus a 5% commission on net sales. 3.Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50. Questions: compute the break-even point in dollars for 2010. (round your answers to 0 decimal places, e.g. 1,200,200. For computational purposes round unit costs and contribution margin ratios to 4 decimal places e.g. 0.2250. Round all other computations to 0 decimal places, e.g. 1,500,100.) $ Also, compute the break-even point in dollars under each of the alternative courses of action. (Round your answers to 0 decimal places.) 1-Increase selling price ( ) 2-Change compensation $ ( ) 3-Purchase machinery $ ( ) Which alternative is the recommended course of action
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