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 $ 1,580,000; total costs and expenses $ 1,637,040; and net loss $ 57,040. Costs and expenses consisted of the following. Total Variable Fixed Cost of goods sold $972.000 $ 486,000 $ 486,000 Selling expenses 517,040 90,000 427,040 Administrative expenses 148,000 56,000 92,000 $1,637,040 $632,000 $1,005,040 Management is considering the following independent alternatives for 2020. 1. Increase unit selling price 25% with no change in costs and expenses. Change the compensation of salespersons from fixed annual salaries totaling $ 203,000 to total salaries of $ 36,985 plus a 5% commission on net sales. 2. (a) Compute the break-even point in dollars for 2019. (Round contribution margin ratio to 4 decimal places eg. 0.2512 and final answer too decimal places, es 2510) 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 es. 0.251 and final answers to decimal places, es 2.510) Break-even point 1. Increase selling price $ 2. Change compensation 5 3. Purchase machinery $ Which course of action do you recommend? 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 $ 1,580,000; total costs and expenses $ 1,637,040; and net loss $ 57,040. Costs and expenses consisted of the following. Total Variable Fixed Cost of goods sold $972.000 $ 486,000 $ 486,000 Selling expenses 517,040 90,000 427,040 Administrative expenses 148,000 56,000 92,000 $1,637,040 $632,000 $1,005,040 Management is considering the following independent alternatives for 2020. 1. Increase unit selling price 25% with no change in costs and expenses. Change the compensation of salespersons from fixed annual salaries totaling $ 203,000 to total salaries of $ 36,985 plus a 5% commission on net sales. 2. (a) Compute the break-even point in dollars for 2019. (Round contribution margin ratio to 4 decimal places eg. 0.2512 and final answer too decimal places, es 2510) 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 es. 0.251 and final answers to decimal places, es 2.510) Break-even point 1. Increase selling price $ 2. Change compensation 5 3. Purchase machinery $ Which course of action do you recommend
