The condensed budgeted income statement for the Michelle and Anthony partnership for 2022 is as follows:

MICHELLE AND ANTHONY LLP Income Statement Year Ending December 31, 2022
Sales (288,000 units)				$1,440,000
Cost of goods sold				960,000
Gross profit				480,000
Operating expenses
Selling		$336,000
Administrative		180,000		516,000
Operating loss				$(36,000)

A cost behaviour analysis indicates that 75% of the cost of goods sold is variable, 42% of the selling expenses are variable, and 40% of the administrative expenses are variable. (Use the CVP income statement format in calculating operating income.)

Calculate the break-even point in total sales dollars and in units for 2022. (Round contribution margin per unit to 2 decimal places, e.g. 1.25, contribution margin ratio to 1 decimal place, e.g. 15.2% and final answers to 0 decimal places, e.g. 5,275.)

Break-even point in sales		$enter a dollar amount
Break-even point in units		enter a number of units

Question Part Score

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Michelle has proposed a plan to get the partnership out of the red and improve its profitability. She feels that the quality of the product could be substantially improved by spending $0.25 more per unit on better raw materials. The selling price per unit could be increased to only $5.25 because of competitive pressures. Michelle estimates that sales volume will increase by 25%. Calculate the break-even point in total sales dollars and in units under the proposed plan. (Round contribution margin per unit and contribution margin ratio to 2 decimal places, e.g. 15.25 or 15.25% and final answers to 0 decimal places, e.g. 5,275.)

Break-even point in sales		$enter a dollar amount
Break-even point in units		enter a number of units

What effect would Michelles plan have on the partnerships operating income and its break-even point in dollars?

This plan would select an option havehave no effect on the break-even point in units, but select an effect increasesdecreases break-even point in sales dollars because of the select an option higherlower selling price.

It select an option decreasesincreases the operating income before tax from a select an option profitloss of $enter a dollar amount to an select an item operating income after taxoperating income before tax of $enter a dollar amount .

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Anthony was a marketing major in university. He believes that the sales volume can be increased only by intensive advertising and promotional campaigns. He therefore proposed the following plan as an alternative to Michelles: (1) increase variable selling expenses to $0.55 per unit, (2) lower the selling price per unit by $0.25, and (3) increase fixed selling expenses by $48,000. Anthony quoted an old marketing research report that said that sales volume would increase by 60% if these changes were made. Calculate Anthonys break-even point in dollars and units. (Round contribution margin per unit and contribution margin ratio to 2 decimal places, e.g. 15.25 or 15.25% and final answers to 0 decimal places, e.g. 5,275.)

Break-even point in sales		$enter a dollar amount
Break-even point in units		enter a number of units

Question Part Score

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Determine which plan should be accepted.

select a plan Michelles play Anthony's planBoth the plansNone of the plans should be accepted.