Item 1

Gorham Manufacturing's sales slumped badly 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 600,000 units of product: Net sales $2,400,000; total costs and expenses $2,540,000; and net loss $140,000. Costs and expenses consisted of the amounts shown below.

Total Variable Fixed

Cost of goods sold $2,100,000 $1,440,000 $660,000

Selling expenses 240,000 72,000 168,000

Administrative expenses 200,000 48,000 152,000

$2,540,000 1,560,000 980,000

Management is considering the following independent alternatives for 2011.

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 $210,000 to total salaries of $60,000 plus a 5% commission on net sales.

-What is the break even poiont?

-Compute the break-even point in dollars under each of the alternative courses(1&2) of action. (Round unit price and ratios to 3 decimal places, e.g. 3.510, and final answers to 0 decimal places, e.g. 2,250,100.)

Item 2

Dixie Candle Supply makes candles. The sales mix (as a percentage of total dollar sales) of its three product lines is birthday candles 30%, standard tapered candles 60%, and large scented candles 10%. The contribution margin ratio of each candle type is shown below. Candle Type Contribution Margin Ratio Birthday 20% Standard tapered 35% Large scented 50% (a) What is the weighted-average contribution margin ratio? Weighted-average contribution margin ratio Enter weighted-average contribution margin in percentages %