Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Pharoah Inc. had a bad year in 2021. For the first time in its history, it operated at a loss. The company's income statement showed

image text in transcribed
image text in transcribed
Pharoah Inc. had a bad year in 2021. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 89,600 units of product: net sales $2.240,000; total costs and expenses $2,503.200, and net loss $263,200. Costs and expenses consisted of the following. Total Variable Fixed $1,756,160 $1,176,000 $580,160 Cost of goods sold Selling expenses Administrative expenses 579,040 103,040 476,000 168,000 64960 103,040 $2,503,200 $1.344.000 $1,159.200 Management is considering the following independent alternatives for 2022. 1. 2 Increase unit selling price 25% with no change in costs and expenses. Change the compensation of sales persons from fixed annual salaries totaling $224,000 to total salaries of $44,800 plus a 5% commission on net sales. Purchase new high-tech factory machinery that will change the proportion between variable and foxed cost of goods sold to 50:50 3. (a) Compute the break even point in sales dollars for 2021. (Round contribution margin ratio to 4 decimal places es 02512 and final answer to decimal places, es 2,510) Break-even point 2898000 (a) Compute the break-even point in sales dollars for 2021. (Round contribution margin ratio to 4 decimal places es. 0.25 12 and final answer to O decimal places, eg: 2,510) Break-even point $ 2898000 (b) Compute the break-even point in sales dollars under each of the alternative courses of action for 2022. (Round contribution margin ratio to 3 decimal places es. 0.251 and final answers to decimal places, es 2,510) Break-even point 1. Increase selling price $ 2 Change compensation S 3. Purchase machinery $ Which course of action do you recommend? Arte

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing The Procurement Function The Iia Research Foundation Handbook Series

Authors: David O Regan, CIA, FCA

1st Edition

0894136224, 978-0894136221

More Books

Students also viewed these Accounting questions