P22-3A Magic Manufacturing's sales slumped badly in 2012. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 600,000 units of product: Net sales $2,400,000; total costs and expenses $2,540,000; and net loss $140,000. Costs and expenses consisted of the amounts shown below. Cost of goods sold Selling expenses Administrative expenses Total $2,100,000 240,000 200,000 $2,540,000 Variable $1,440,000 72,000 48,000 $1,560,000 Fixed $660,000 168,000 152,000 $980,000 Management is considering the following independent alternatives for 2013. 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 3% commission on net sales. 3. Purchase new automated equipment that will change the proportion between variable and fixed cost of goods sold to 54% variable and 46% fixed. Instructions (a) Compute the break-even point in dollars for 2012. (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?

P22-3A Magic Manufacturing's sales slumped badly in 2012. For the first time in its history, it operated at a loss The company's income statement showed the following results from selling 600,000 units of product: Net sales $2,400,000; total costs and expenses $2,540,000; and net los $140,000. Costs and expenses consisted of the amounts shown below. Management is considering the following independent alternatives for 2013. 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 3% commission on net sales. 3. Purchase new automated equipment that will change the proportion between variable and fixed cost of goods sold to 54% variable and 46% fixed. Instructions (a) Compute the break-even point in dollars for 2012. (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