Wildhorse Inc. had a bad year in 2021. For the first time in its history, it...
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Wildhorse Inc. had a bad year in 2021. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 104,000 units of product: net sales $2,600.000, total costs and expenses $2,905,500; and net loss $305,500. Costs and expenses consisted of the following. Total Variable Fixed Cost of goods sold $2,038,400 $1,365,000 $673,400 Selling expenses 672,100 119,600 552,500 Administrative expenses 195,000 75,400 119,600 $2.905.500 $1,560,000 $1,345,500 Management is considering the following independent alternatives for 2022. 1. Increase unit selling price 25% with no change in costs and expenses. Change the compensation of salespersons from fixed annual salaries totaling $260,000 to total salaries of $52.000 olus a 2. 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. (a) Compute the break-even point in sales dollars for 2021. (Round contribution margin ratio to 4 decimal places eg. 0.2512 and final dnswer to 0 decimal places, eg. 2,510.) Break-even point %24 (b) Compute the break-even point in sales dollars under each of the alternative courses of action for 2022. (Round contribution margin ratio to 3 decimal places eg. 0.251 and final answers to 0 decimal places, eg. 2,510J Break-even point 1. Increase selling price %24 2. Change compensation %24 3. Purchase machinery Which course of action do you recommend? Wildhorse Inc. had a bad year in 2021. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 104,000 units of product: net sales $2,600.000, total costs and expenses $2,905,500; and net loss $305,500. Costs and expenses consisted of the following. Total Variable Fixed Cost of goods sold $2,038,400 $1,365,000 $673,400 Selling expenses 672,100 119,600 552,500 Administrative expenses 195,000 75,400 119,600 $2.905.500 $1,560,000 $1,345,500 Management is considering the following independent alternatives for 2022. 1. Increase unit selling price 25% with no change in costs and expenses. Change the compensation of salespersons from fixed annual salaries totaling $260,000 to total salaries of $52.000 olus a 2. 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. (a) Compute the break-even point in sales dollars for 2021. (Round contribution margin ratio to 4 decimal places eg. 0.2512 and final dnswer to 0 decimal places, eg. 2,510.) Break-even point %24 (b) Compute the break-even point in sales dollars under each of the alternative courses of action for 2022. (Round contribution margin ratio to 3 decimal places eg. 0.251 and final answers to 0 decimal places, eg. 2,510J Break-even point 1. Increase selling price %24 2. Change compensation %24 3. Purchase machinery Which course of action do you recommend?
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Basics of marginal costing are given below YJ YK Basics of marginal costing 1 sales variable cos... View the full answer
Related Book For
Managerial Economics and Business Strategy
ISBN: 978-0071267441
7th Edition
Authors: Michael R. baye
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