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Midlands Inc. had a bad year in 2016. For the first time in its history, it operated at a loss. The company's income statement showed
Midlands Inc. had a bad year in 2016. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 79,000 units of product: net sales $1,580,000; total costs and expenses $1,672,000; and net loss $92,000. Costs and expenses consisted of the following. Total Variable Fixed $1.000,000 $479,000 Cost of goods sold $521.000 93.000 429,000 Selling expenses 522.000 Administrative expenses 150.000 60.000 90,000 $1,672,000 $632,000 $1,040,000 Management is considering the following independent alternatives for 2017. Increase unit selling price 20 % with no change in costs and expenses. 1 Change the compensation of salespersons from fixed annual salaries totaling $195,000 to total salaries $39,000 plus a 5 % commission on net sales. 2 3 Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50. (a) Compute the break-even point in dollars for 2017. (Round contribution margin ratio to 2 decimal places e.g. 0.25 and final answer to 0 decimal places, e.g. 2,510.) Break-even point $ (b) Compute the break-even point in dollars under each of the alternative courses of action. (Round contribution margin ratio to decimal places e.g. 0.2512 and final answers to 0 decimal places, e.g. 2,510.) Break-even point Increase selling price 1 2. Change compensation 3. Purchase machinery Altemative 1 Which course of action do you recommend3
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