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Midlands Inc. had a bad year in 2019. For the first time in its history, it operated at a loss. The companys income statement showed
Midlands Inc. had a bad year in 2019. For the first time in its history, it operated at a loss. The companys income statement showed the following results from selling 78,000 units of product: net sales $1,560,000; total costs and expenses $1,795,200; and net loss $235,200. Costs and expenses consisted of the following.
Midlands Inc had a bad year in 2019. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 78,000 units of product: net sales $1,560,000; total costs and expenses $1,795,200; and net loss $235,200. Costs and expenses consisted of the following. Total Variable Fixed $1,125,600 $633,000 $492,600 Cost of goods sold Selling expenses Administrative expenses 522,600 90,000 432,600 147,000 57,000 90,000 $1,795,200 $780,000 $1,015,200 Management is considering the following independent alternatives for 2020. 1. Increase unit selling price 25% with no change in costs and expenses. 2. Change the compensation of salespersons from fixed annual salaries totaling $202,000 to total salaries of $40,990 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 2019. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and final answer to decimal places, eg. 2,510.) Break-even point $ (b) Compute the break-even point in dollars under each of the alternative courses of action for 2020. (Round contribution margin ratio to 3 decimal places e.g. 0.251 and final answers to decimal places, e.g. 2,510.) Break-even point 1. Increase selling price $ 2. Change compensation $ 3. Purchase machinery $ $ Which course of action do you recommendStep by Step Solution
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