Griffey Manufacturing's sales slumped badly in 2010. 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: Net sales \(\$ 2,500,000\); total costs and expenses \(\$ 2,600,000\); and net loss \(\$ 100,000\). Costs and expenses consisted of the following.

Management is considering the following independent alternatives for 2011.
1. Increase unit selling price \(20 \%\) with no change in costs and expenses.
2. Change the compensation of salespersons from fixed annual salaries totaling \(\$ 210,000\) to total salaries of \(\$ 70,000\) plus a \(4 \%\) commission on net sales.
3. Purchase new automated equipment that will change the proportion between variable and fixed cost of goods sold to \(60 \%\) variable and \(40 \%\) fixed.
Instructions:

(a) Compute the break-even point in dollars for 2010.

(b) Compute the break-even point in dollars under each of the alternative courses of action. (Round to the nearest dollar.) Which course of action do you recommend?

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Total Variable Fixed Cost of goods sold $2,100,000 $1,440,000 $ 660,000 Selling expenses 300,000 72,000 Administrative expenses 200,000 48,000 $2,600,000 $1,560,000 228,000 152,000 $1,040,000