Midlands Inc. had a bad year in 2016. For the first time in its history, it operated at a loss. The companys income statement showed the following results from selling 77,000 units of product: net sales $2,310,000; total costs and expenses $1,944,000; and net loss $-366,000. Costs and expenses consisted of the following.

		Total		Variable		Fixed
Cost of goods sold		$1,275,000		$774,000		$501,000
Selling expenses		520,000		94,000		426,000
Administrative expenses		149,000		56,000		93,000
		$1,944,000		$924,000		$1,020,000

Management is considering the following independent alternatives for 2017.

1.		Increase unit selling price 25% with no change in costs and expenses.
2.		Change the compensation of salespersons from fixed annual salaries totaling $197,000 to total salaries of $40,000 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.

(a) Compute the break-even point in dollars for 2017.

AND

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

1. Increasing selling price.

2. Change compensation.

3. Purchase machinery.

AND

Which course of action do you recommend?