Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

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

eTextbook and Media

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

Clinical Audit In Physiotherapy From Theory Into Practice

Authors: Sue Barnard MSc MCSP, Gayle Hartigan

1st Edition

075063779X, 978-0750637794

More Books

Students also viewed these Accounting questions

Question

define the term outplacement

Answered: 1 week ago

Question

describe the services that an outplacement consultancy may provide.

Answered: 1 week ago