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Tanek Corp.'s sales slumped badly in 2017. For the first time in history, it operated at a loss. The company's income statement showed the following

Tanek Corp.'s sales slumped badly in 2017. For the first time in history, it operated at a loss. The company's income statement showed the following results from selling 580,500 units of product: sales $2,902,500, total costs and expenses $3,018,600, and net loss $116,100. Costs and expenses consisted of the amounts shown below.

Total Variable Fixed

Cost of goods sold: $2,484,540 $1,845,990 $638,550

Selling Expenses 290,250 106,812 183,438

Administrative Exp. 243,810 78,948 164,862

____________________________________________

$3,018,600 $2,031,750 $986,850

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 $174,150 to total salaries of $69,660 plus a 6% commission on sales.

A. Compute the break even point in dollars for 2017. Round final answers. $_________________

B. Compute the contribution margin under each of the alternative courses of action.

Contribution margin for alternative 1:_______________%

Contribution margin for alternative 2: _______________%

C. Compute the break even point in dollars under each of the alternatives courses of action. Round answers.

Break even point for alternative 1: $_________________

Break even point for alternative 2: $_________________

D. What course of action do you recommend? ______________________

Please show work. Thanks,

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