Gorham Manufacturing’s sales slumped badly in 2022. For the first time in its history, it operated at a loss. The company’s income statement showed the following results from selling 60,000 units of product: net sales $1.8 million; total costs and expenses $2,010,000; and operating loss $210,000. Costs and expenses consisted of the amounts shown below:

Management is considering the following independent alternatives for 2023: 

1. Increase the unit selling price by 25% with no change in costs, expenses, or sales volume. 

2. Change the compensation of salespersons from fixed annual salaries totalling $200,000 to total salaries of $20,000 plus a 5% commission on net sales. 

3. Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50.

Instructions 

a. Calculate the break-even point in dollars for 2022. 

b. Calculate the break-even point in dollars under each of the alternative courses of action. (Round all ratios to nearest full percent.)

Transcribed Image Text:

Cost of goods sold Selling expenses Administrative expenses Total $1,350,000 480,000 180,000 $2,010,000 Variable $ 930,000 125,000 115,000 $1,170,000 Fixed $420,000 355,000 65,000 $840,000