P6-1A Midlands Inc. had a bad year in 2016. For the first time in its history, it operated at Compute break a loss. The company's income stateme units of product: net sales $2,000,000; total costs and expenses $2.2 $235,000. Costs and expenses consisted of the following. the following results from selling 80,000 under alternath 35,000; and net loss of action. (LO 1), AN Total Variable Fixed Cost of goods sold Selling expenses Administrative expenses $1,568,000 $1,050,000 518,000 425,000 92,000 $2.235.000 $1.200,000 $1.035.000 517,000 150,000 92,000 58,000 Management is considering the following independent alternatives for 2017. 1 . Increase unit selling price 25% with no change in costs and expenses. 2. Change the compensation of salespersons from fixed annual salaries totaling $200 to total salaries of $40,000 plus a 5% commission on net sales. 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 2017 (b) Compute the break-even point in dollars under each of the alternative courses of to) a) s2 so0co action. (Round to the nearest dollar) Which course of action do you recommend? A Tanek Industries manufactures and sells three different models of wet-dry shop vacuum cleaners. Although the shop vacs vary in terms of quality and features, all are De lin sellers. Tanek is currently operating at full capacity with limited machine time. Sales and production information relevant to each model follows. (LO Product Standard $50 $20 0.8 Deluxe $100 $46 1.6 Economy Selling price Variable costs and expenses Machine hours required $16 0.5 Instructions (a) Ignoring the machine time constraint, which single product should Tanek Industries produce? (b) What is the contribution margin per unit of limited resource for each product? (c) If additional machine time could be obtained, how should the additional time be used? P6-5A The following CVP income statements are available for Blanc Company Company and Noir Con leve Noir Company Blanc Company $500,000 280,000 220,000 170,000 50,000 fina (LO $500,000 EP Sales Variable costs Contribution margin Fixed costs Net income 180,000 320,000 270,000 $ 50,000 Instructions (a) (a) Compute the break-even point in dollars and the margin of safety ratio (round to 3 places) for each company each company each company leverage and profitability (b) (b) Compute the degree of operating leverage for each company and interpret your results. (c) Assuming that sales revenue increases by 20%, prepare a CVP income statement for (d) Assuming that sales revenue decreases by 20%, prepare a CVP income statement for (e)Discuss how the cost structure of these two companies affects their operating
