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Sheridan Corp's sales slumped badly in 2020. For the first time in its history, it operated at a loss. The company's income statement showed the
Sheridan Corp's sales slumped badly in 2020. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 515,500 units of product: sales $2,577,500, total costs and expenses $2,663,375, and net loss $85,875. Costs and expenses consisted of the amounts shown below. Total Variable Fixed Cost of goods sold $2,189,115 $1,768,165 $420,950 Selling expenses 257,750 94,852 162,898 Administrative expenses 216,510 70,108 146,402 $2,663,375 $1,933,125 $730,250 Management is considering the following independent alternatives for 2021. 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 $154,650 to total salaries of $61,860 plus a 5% commission on sales. Compute the break-even point in dollars for 2020. Break-even point $ Compute the contribution margin under each of the alternative courses of action. (Round contribution margin ratio to O decimal places, e.g. 50%) Contribution margin for alternative 1 Contribution margin for alternative 2 Compute the break-even point in dollars under each of the alternative courses of action. Break-even point for alternative 1 $ Break-even point for alternative 2 $ Which course of action do you recommend? Alternative 1 v
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