Pharoah Corp.$$s sales slumped badly in $2025.$ For the first time in its history, it operated at a loss. The company$$s income statement showed the following results from selling $525,500$ units of product: sales $$2,627,500,$ total costs and expenses $$2,715,125,$ and net loss $$87,625.$ Costs and expenses consisted of the following amounts.

Total

Variable

Fixed

Cost of goods sold

$$2,231,665$ $$1,802,465$ $$429,200$

Selling expenses

$262,75096,692166,058$

Administrative expenses

$220,71071,468149,242$

$$2,715,125$ $$1,970,625$ $$744,500$

Management is considering the following independent alternatives for $2026.$

$1.$ Increase the unit selling price $25\%$ with no change in total costs, total expenses, and sales volume.

$2.$ Change the compensation of sales personnel from fixed annual salaries totaling $$157,650$ to total salaries of $$63,060$ plus a $5\%$ commission on sales. All other total costs, total expenses, and total sales remain unchanged.

$($a$)$

Your answer is correct.

Compute the break$-$even point in sales dollars for $2025.$

Break$-$even point

$enter break$-$even point in dollars

$2978000$

Correct answer

eTextbook and Media

Attempts: $2$ of $3$ used

$($b$)$

Compute the contribution margin ratio under each of the alternative courses of action. $($Round answers to $0$ decimal places, e$.$g$.52\%.)$

Contribution margin ratio for alternative $1$

enter contribution margin for alternative $1$ in percentage

$\%$

Contribution margin ratio for alternative $2$

enter contribution margin for alternative $2$ in percentage

$\%$

Compute the break$-$even point in sales dollars under each of the alternative courses of action. $($Round intermediate value for contribution margin ratio to $0$ decimal places, e$.$g$.52\%$ and final answer to $0$ decimal places, e$.$g$.5,275.)$

Break$-$even point for alternative $1$

$enter break$-$even point for alternative $1$ in dollars

Break$-$even point for alternative $2$

$enter break$-$even point for alternative $2$ in dollars

Which course of action do you recommend? select an option