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 80,000 units of product: net sales $2,000,000; total costs and expenses $2,235,000; and net loss $235,000. Costs and expenses consisted of the following.

		Total		Variable		Fixed
Cost of goods sold		$1,568,000		$1,050,000		$518,000
Selling expenses		517,000		92,000		425,000
Administrative expenses		150,000		58,000		92,000
		$2,235,000		$1,200,000		$1,035,000

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 $200,000 to total salaries of $40,000 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.

(b) Compute the break-even point in dollars under each of the alternative courses of action for 2020.

	Break-even point
1.		Increase selling price		$
2.		Change compensation		$
3.		Purchase machinery		$

Which course of action do you recommend? Alternative 1, 2, or 3.