Oriole Corp.s sales slumped badly in 2020. For the first time in its history, it operated at a loss. The companys income statement showed the following results from selling 555,500 units of product: sales $ 2,777,500, total costs and expenses $ 2,869,875, and net loss $ 92,375. Costs and expenses consisted of the amounts shown below.

Total Variable Fixed

Cost of goods sold		$ 2,358,815		$ 1,905,365		$ 453,450
Selling expenses		277,750		102,212		175,538
Administrative expenses		233,310		75,548		157,762

Management is considering the following independent alternatives for 2021.

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 $ 166,650 to total salaries of $ 66,660 plus a 5% commission on sales

Compute the contribution margin under each of the alternative courses of action.

Contribution margin for alternative 1		%
Contribution margin for alternative 2		%

Compute the break-even point in dollars under each of the alternative courses of action.

Break-even point for alternative 1		$
Break-even point for alternative 2		$

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