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Swifty Inc. had a bad year in 2019. For the first time in its history, it operated at a loss. The company's income statement
Swifty Inc. had a bad year in 2019. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 78,000 units of product: net sales $1,560,000; total costs and expenses $1,795,200; and net loss $235,200. Costs and expenses consisted of the following. Total Variable Fixed Cost of goods sold $1,115,600 $628,000 $487,600 Selling expenses 526,600 94,000 432,600 Administrative expenses 153,000 58,000 95,000 $1,795,200 $780,000 $1,015,200 Management is considering the following independent alternatives for 2020. 1. Increase unit selling price 25% with no change in costs and expenses. 2. 3. Change the compensation of salespersons from fixed annual salaries totaling $202,000 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. (a) Compute the break-even point in dollars for 2019. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and final answer to 0 decimal places, e.g. 2,510.) Break-even point 2030400 (b) Compute the break-even point in dollars under each of the alternative courses of action for 2020. (Round contribution margin ratio to 3 decimal places e.g. 0.251 and final answers to O decimal places, e.g. 2,510.) 1. Increase selling price Break-even point 2. Change compensation $ 3. Purchase machinery Which course of action do you recommend?
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