George Corporation sales slumped badly in 2020. For the first time in its history, it operated at a loss. The companys income statement showed the following results from selling 555,500 units of product: sales $2,777,500, total costs and expenses $2,869,375, and net loss $91,875. Costs and expenses consisted of the amounts shown below.

Total Variable Fixed

Cost of goods sold $2,358,315 $1,905,365 $452,950

Selling expenses 277,750 102,212 175,538

Administrative expenses 233,310 75,548 157,762

$2,869,375 $2,083,125 $786,250

Management is considering the following independent alternatives for 2021.

1.		Increase unit selling price 25% with no change in costs, expenses, and sales volume.
2.		Change the compensation of salespersons from fixed annual salaries totaling $166,650 to total salaries of $66,660 plus a 5% commission on sales.

a) Compute the break-even point in dollars for 2020.

Break-even point $______

b) Compute the contribution margin under each of the alternative courses of action

contribution margin for alternative 1: ____%

contribution margin for alternative 2: ____%

c) Compute the break-even point in dollars under each of the alternative courses of action.

Break-even point for alternative 1: $______

Break-even point for alternative 2: $________

d) Which course of action do you recommend alternative 1 or alternative 2?