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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 company's income statement showed
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 80,000 units of product: net sales $2,000,000; total costs and expenses $2,210,000; and net loss $210,000. Costs and expenses consisted of the following. Cost of goods sold Selling expenses Administrative expenses Total Variable Fixed $1,542,000 $1,051,000 $491,000 522,000 93,000 429,000 146,000 56,000 $2,210,000 $1,200,000 $1,010,000 90,000 Management is considering the following independent alternatives for 2020, 1. 2 Increase unit selling price 20% with no change in costs and expenses. Change the compensation of salespersons from fixed annual salaries totaling $205,000 to total salaries of $42,000 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 eg. 0.2512 and final answer to O 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, eg, 2,510) Break-even point 1. 2. Increase selling price Change compensation Purchase machinery $ 3. $ Which course of action do you recommend
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