The condensed income statement for the Sandhill and Paul partnership for 2020 is as follows. Sandhilland Paul
Question:
The condensed income statement for the Sandhill and Paul partnership for 2020 is as follows.
Sandhilland Paul Company
Income Statement
For the Year Ended December 31, 2020
Sales (270,000 units) $1,350,000
Cost of goods sold 864,000
Gross profit 486,000
Operating expenses
Selling $315,000
Administrative 175,500
490,500
Net loss $(4,500)
A cost behavior analysis indicates that 75% of the cost of goods sold are variable, 42% of the selling expenses are variable, and 40% of the administrative expenses are variable.
Compute the break-even point in total sales dollars for 2020.(Round intermediate calculations to 2 decimal places, e.g. 15.25 and final answers to 0 decimal places, e.g. 2,520.)
Break-even point in dollars $1,362,162
Sandhill 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. Sandhill estimates that sales volume will increase by 25%. Compute the net income under Sandhill's proposal and the break-even point in dollars.(Round intermediate calculations to 4 decimal places, e.g. 15.2515 and final answers to 0 decimal places, e.g. 2,520.)
Net income $120,375
Break-even point $1,430,270
Paul was a marketing major in college. He believes that sales volume can be increased only by intensive advertising and promotional campaigns. He therefore proposed the following plan as an alternative to Sandhill's: (1) increase variable selling expenses to $0.59 per unit, (2) lower the selling price per unit by $0.25, and (3) increase fixed selling expenses by $43,000. Paul quoted an old marketing research report that said that sales volume would increase by 60% if these changes were made. Compute the net income under Paul's proposal and the break-even point in dollars.(Round intermediate calculations to 4 decimal places, e.g. 15.2515 and final answers to 0 decimal places, e.g. 2,520.)
Net income $101000
Break-even point $____________