Taan Apparel’s sales slumped badly in 2020. For the first time in its history, it operated at a loss. The company’s income statement showed the following results from selling 500,000 units of product: sales NT$2,500,000, total costs and expenses NT$2,600,000, and net loss NT$100,000. Costs and expenses consisted of the amounts shown below.

Management is considering the following independent alternatives for 2021.

1. Increase unit selling price 20% with no change in costs, expenses, and sales volume.

2. Change the compensation of salespersons from fi xed annual salaries totaling NT$150,000 to total salaries of NT$60,000 plus a 5% commission on sales.

Instructions

a. Compute the break-even point in sales for 2020.

b. Compute the break-even point in sales under each of the alternative courses of action. (Round all ratios to nearest full percent.) Which course of action do you recommend?

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Total Variable NT$1,590,000 Fixed |Cost of goods sold Selling expenses Administrative expenses NT$2,140,000 NT$550,000 158,000 250,000 210,000 92,000 68,000 NT$1,750,000 142,000 NT$2,600,000 NT$850,000