P19-3B Olgivie 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. Fixed $420,000 355,000 65,000 S840,000 Total $1,350,000 480.000 180.000 $2.010.000 Variable $ 930,000 125.000 115.000 $1.170.000 Cost of goods sold Selling expenses Administrative expenses 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%. (b-1) EYI The effect of this alternative is to increase the selling price per unit to $37.50 ($30X 125%). (b-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]. (b-3) FYI: The effects of this alternative 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)