Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

image text in transcribedimage text in transcribed

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. Cost of goods sold Selling expenses Total Variable Fixed $1,345,250 $840,500 $504,750 506,050 91,000 415,050 146,000 56,000 90,000 $1,997,300 $987,500 $1,009,800 Administrative expenses 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 $199,000 to total salaries of $42,985 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 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 e.g. 0.251 and final answers to O 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 recommend

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting The Ultimate Guide To Accounting Principles

Authors: Greg Shields

1st Edition

1722964839, 978-1722964832

More Books

Students also viewed these Accounting questions

Question

Do you think people have a need for growth and development?

Answered: 1 week ago

Question

Describe the characteristics of a 360-degree performance appraisal.

Answered: 1 week ago