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 79,000 units of product: net sales $1,975,000; total costs and expenses $1,997,300; and net loss $22,300. Costs and expenses consisted of the following. Total Variable Fixed Cost of goods sold Selling expenses Administrative expenses $1,345,250 506,050 146,000 $1,997,300 $840,500 91,000 56,000 $987,500 $504,750 415,050 90,000 $1,009,800 Management is considering the following independent alternatives for 2020. 1. 2. Increase unit selling price 25% with no change in costs and expenses. Change the compensation of salespersons from fixed annual salaries totaling $199,000 to total salaries of $42,985 plus a 5% commission on net sales. Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50. 3. (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 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 for 2020. (Round contribution margin ratio to 3 decimal places eg. 0.251 and final answers to 0 decimal places, e.g. 2,510.) Break-even point 1. Increase selling price $ 2. Change compensation $ 3. Purchase machinery $ 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 79,000 units of product: net sales $1,975,000; total costs and expenses $1,997,300; and net loss $22,300. Costs and expenses consisted of the following. Total Variable Fixed Cost of goods sold Selling expenses Administrative expenses $1,345,250 506,050 146,000 $1,997,300 $840,500 91,000 56,000 $987,500 $504,750 415,050 90,000 $1,009,800 Management is considering the following independent alternatives for 2020. 1. 2. Increase unit selling price 25% with no change in costs and expenses. Change the compensation of salespersons from fixed annual salaries totaling $199,000 to total salaries of $42,985 plus a 5% commission on net sales. Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50. 3. (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 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 for 2020. (Round contribution margin ratio to 3 decimal places eg. 0.251 and final answers to 0 decimal places, e.g. 2,510.) Break-even point 1. Increase selling price $ 2. Change compensation $ 3. Purchase machinery $
