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Dousmann Corp.'s sales slumped badly in 2014. For the first time in its history, it operated at a loss. The company's income statement showed the
Dousmann Corp.'s sales slumped badly in 2014. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 500,000 units of product: sales $2,500,000; total costs and expenses $2,600,000; and net loss 100,000. Costs and expenses consisted of the amounts shown below. To Varia Fix Cost of goods sold Selling expenses Administrative expenses $2,140,000 $1,540,000 $600,000 92,000 158,000 68,000 142,000 $2,600,000 1,700,000 $900,000 250,000 210,000 Management is considering the following independent alternatives for 2015 1. Increase unit selling price 20% with no change in costs, expenses, and sales volume 2. Change the compensation of salespersons from fixed annual salaries totaling $150,000 to total salaries of $60,000 plus a 5% commission on sales (a) Compute the break-even point in dollars for 2014. (Round final answer to 0 decimal places, e.g. 1,225.) Break-even point (b) Compute the contribution margin under each of the alternative courses of action. (Round final answers to 0 decimal places, e.g. 1,225.) Contribution margin for alternative 1 Contribution margin for alternative 2
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