Scenario:

DessertsPlus Inc. was founded 2 years ago and has had declining sales for the past 2 years:

The most recent income statement for 2022 shows the following results selling 104,535 units which resulted in sales of $2,404,305:

DessertsPlus Income Statement: 2022

Total

Variable

Fixed

Cost of goods sold

$2,120,000

$1,591,655

$528,345

Selling expenses

245,920

90,990

154,930

Administrative expenses

197,160

67,034

130,126

$2,563,080

$1,749,679

$813,401

The owners are considering the following independent alternatives going forward for the coming year.

1. Increasing the unit prices by either 15% and 20% without changing selling and administrative expenses.
2. Moving their business to a less expensive lease location saving the company $120,000 per year.
3. Change the compensation of sales personnel from fixed annual salaries totaling $150,000 to total salaries of $60,000 plus 4% commission on sales. All other total costs total expenses and total sales remain unchanged.

Provide the following:

• Compute and explain the break-even point in sales dollars for 2022.
• Compute and explain the break-even point in sales dollars under each of the alternative courses of action.
• What course of action do you recommend and why?