O.A Normal No Spacing Heading 1 Heading 2 TE Subtitle Styles Pane P19-3B Olalvie Company had a bad year in 2016. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 60,000 units of product sales $1,800,000; total costs and expenses $2,010,000, and net loss $210,000. Costs and expenses consisted of the amounts shown below Total Variable Fixed Cost of goods sold $1,350,000 $ 930,000 $420,000 Selling expenses 480,000 125,000 355,000 Administrative expenses 180.000 115.000 65.000 $2.010.000 $1.170.000 5840.000 Management is considering the following independent alternatives for 2017 1. Increase unit selling price 25% with no change in costs, expenses, and sales volume 2. Change the compensation of salespersons from fixed annual salaries totaling $200,000 to total salaries of $20,000 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 Instructions (a) Compute the break-even point in dollars for 2016 (b) Compute the break-even point in dollars under each of the alternative courses of action (Round all ratios to nearest full percent) Which course of action do you recommend? (a) FYI: Sales were $1,800,000 and variable expenses were $1,170,000, which means contribution margin was $630,000 and/CM ratio was 35% (6-1 LEY: The effect of this alternative is to increase the selling price per unit to $37.50 ($30 X 125%). (0-2) FYI: The effects of this alternative are to change total fixed costs to $660,000 (3840,000 $180,000) and to change the contribution margin to 30 ($1,800,000 - $1,170,000 - $90,000) + $1,800,000) (6-3) FYI: The effects of this afternative are: (variable and fixed cost of goods sold become $675 000 ooch (2) total variable costs become $915,000 $875.000 $125,000 - $115.000), and (3) Focus (a) FYI: Sales were $1,800,000 and variable expenses were $1,170,000, which means contribution margin was $630,000 and CM ratio was 35% (6-12 EY: The effect of this alternative is to increase the selling price per unit to $37.50 ($30 X 125%). (5-2) FYI: The effects of this alternative are to change total fixed costs to $660,000 ($840,000 $180,000) and to change the contribution margin to.30 [($1,800,000 - $1,170,000 - $90,000) + $1,800,000). (6-3) FYI: The effects of this alterative are: (1) variable and fixed cost of goods sold become $675,000 each, (2) total variable costs become $915,000 ($675,000 + $125,000 + $115,000), and (3) total fixed costs are $1,095,000 ($675,000 + $355,000 + $65,000). Show your calculation