P18-3A Tanek Corp.'s sales slumped badly in 2017. For the first time in ated at a loss. The company's income statement showed the following resu 500,000 units of product: sales $2,500,000, total loss $100,000. Costs and expenses consisted of the amounts shown below in 2017. For the first time in its history, it oper- Sales $2,500,000, total costs and expenses $2,600,000, and net ent showed the following results from selling Cost of goods sold Selling expenses Administrative expenses Total $2,140,000 250,000 210,000 $2,600,000 Variable $1,590,000 92,000 68,000 $1,750,000 Fixed $550,000 158,000 142.000 $850,000 Management is considering the following independent alternatives for 2018. 1. Increase unit selling price 20% with no change in costs, expenses, and sales volume. 2. Change the compensation of salespersons from fixed annual salaries totaling $150,000 to total salaries of $60,000 plus a 5% commission on sales. Instructions (a) Compute the break-even point in dollars for 2017. mpute 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? (b) Alter Compute margo A Mary Willis is the advertising manager for Bargain Shoe Store. She is currently working on a major promotional campaign. Her ideas include the installation of a new light ing system and increased display space that will add $24.000 in fixed costs to the $270,000 currently spent. In addition, Mary is proposing that a 5% price decrease ($40 to $38) will $38) will produce a 20% increase in sales volume (20,000 to 24,000). Variable costs will remain at $29 per pair of shoes. Management is impressed with Mary's ideas but concerned about the effects that these changes will have on the break-even point and the margin of safety. before ante business (LUS, Instructions (a) Compute the current break-even point in units, and compare it to the break-even point in units if Mary's ideas are used. (b) Compute the margin of safety ratio for current operations and after Mary's changes are introduced. (Round to nearest full percent.) (c) Prepare a CVP income statement for current operations and after Mary's changes are in- troduced. (Show column for total amounts only) Would you make the changes suggested? (b) Curre ratio P18-5A Viejol Corporation has collected the following information after its first year of sales. Sales were $1,600,000 on 100,000 units, selling expenses $250,000 (40% variable and 60% fixed), direct materials $490,000, direct labor $290,000, administrative expenses $270,000 (20% variable and 80% fixed), and manufacturing overhead $380,000 (70% variable and 30% fixed). Top management has asked you to do a CVP analysis so that it can make plans for the coming year. It has projected that unit sales will increase by 10% next year. Compute fixed cost sales for te margin of (LO 3,4,5) Instructions (a) Compute (1) the contribution margin for the current year and the projected year, and (2) the fixed costs for the current year. (Assume that fixed costs will remain the same in the projected year.) (b) Compute the break-even point in units and sales dollars for the current year. (c) The company has a target net income of $200,000. What is the required sales in dol- lars for the company to meet its target? (d) If the company meets its target net income number, by what percentage could its sales fall before it is operating at a loss? That is, what is its margin of safety ratio? (b) 120,0 P18-6A Kaiser Industries carries no inventories. Its product is manufactured only when Determine customer's order is received. It is then shipped immediately after it is made. For its ratio, brea fiscal year ended October 31, 2017, Kaiser's break-even point was $1.3 million. On sales margin of of $1.2 million, its income statement showed a gross profit of $180,000, direct materi- (LO 1.3.5). als cost of $400,000, and direct labor costs of $500,000. The contribution margin was $180,000, and variable manufacturing overhead was $50,000. (a) (2) 570 Instructions (a) Calculate the following: (1) Variable selling and administrative expenses. (2) Fixed manufacturing overhead. (3) Fixed selling and administrative expenses. (b) Ignoring your answer to part (a), assume that fixed manufacturing overhead was $100.000 and the fixed selling and administrative expenses were $80,000. The market ing vice president feels that if the company increased its advertising, sales could be increased by 25%. What is the maximum increased advertising cost the company can incur and still report the same income as before the advertising expenditure