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P5-3B Olgivie Company had a bad year in 2016 . For the first time in its history, it operated at a loss. The company's income

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P5-3B 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. Mansagement 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? P5-4B Alma Ortiz is the advertising manager for Cost Less Shoe Store. She is currently working on a major promotional campaign. Her ideas include the installation of a new lighting system and increased display space that will add $18,000 in fixed costs to the $216,000 currently spent. In addition. Alma is proposing that a 10% price decrease (from $30 to $27 ) will produce an increase in sales volume from 20,000 to 24,000 units, Variable costs will remain at $12 per pair of shoes. Management is impressed with Alma's ideas but concemed about the effects that these changes will have on the break-even point and the margin of safety. Cost Volume Profit Instructions (a) Compute the eurrent break-even point in units, and compare it to the break-even point in usits if Alma's ideas are used. (b) Compute the margin of safety ratio for current operations and after Alma's changes are introduced. (Round to nearest full percent.) (c) Prepare a CVP income statement for current operations and after Alma's changes are introduced. (Show column for total amounts only.) Would you make the changes suggested

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