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 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 79,000 units of product: net sales $1,580,000; total costs and expenses $1,963,040; and net loss $383,040. Costs and expenses consisted of the following.

Total

Variable

Fixed

Cost of goods sold $1,305,800 $803,000 $502,800
Selling expenses 510,240 90,000 420,240
Administrative expenses 147,000 55,000 92,000
$1,963,040 $948,000 $1,015,040

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 $205,000 to total salaries of $36,015 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 0 decimal places, e.g. 2,510.)

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_2

Step: 3

blur-text-image_3

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

CIA Part 1 Essentials Of Internal Auditing 2022

Authors: MUHAMMAD ZAIN

1st Edition

B09PHFC28N, 979-8794951356

More Books

Students also viewed these Accounting questions

Question

7. Provide appropriate remediation when students fail.

Answered: 1 week ago