Tanek Corp.s sales slumped badly in 2017. For the first time in its history, it operated at a loss. The companys income statement showed the following results from selling 590,500 units of product: sales $2,952,500, total costs and expenses $3,070,600, and net loss $118,100. Costs and expenses consisted of the amounts shown below.

		Total		Variable		Fixed
Cost of goods sold		$2,527,340		$1,877,790		$649,550
Selling expenses		295,250		108,652		186,598
Administrative expenses		248,010		80,308		167,702
		$3,070,600		$2,066,750		$1,003,850

Management is considering the following independent alternatives for 2018.

1.		Increase unit selling price 20% with no change in costs, expenses, and sales volume.
2.		Change the compensation of salespersons from fixed annual salaries totaling $177,150 to total salaries of $70,860 plus a 6% commission on sales.

(a) Compute the break-even point in dollars for 2017. (Round final answer to 0 decimal places, e.g. 1,225.)

Break-even point

$

(b) Compute the contribution margin under each of the alternative courses of action. (Round final answer to 0 decimal places, e.g. 1,225.)

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. (Round selling price per unit to 2 decimal places, e.g. 5.25 and other calculations to 0 decimal places, e.g. 20% and also final answer to 0 decimal places, e.g. 1,225.)

Break-even point for alternative 1		$
Break-even point for alternative 2		$

Which course of action do you recommend? Alternative 1Alternative 2

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