Cruz Manufacturing had a bad year 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 82,000 units of product:

Net sales $1,604,419; total costs and expenses $1,749,200; and net loss $144,781.

Costs and expenses consisted of the following.

Total / variable/ fixed

Management is considering the following independent alternatives for 2011. 
1. Increase unit selling price 22% with no change in costs and expenses.
2. Change the compensation of salespersons from fixed annual salaries totaling $201,200 to total salaries of $37,500 plus a 5% commission on net sales.
3. Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50.
a. compute the break-even point in dollars for 2010. (Round your answers to 0 decimal places, e.g. 1,200,200. For computational purposes round unit costs and contribution margin ratios to 4 decimal places e.g. 0.2250. Round all other computations to 0 decimal places, e.g. 1,500,100.)
b. Also, compute the break-even point in dollars under each of the alternative courses of action. (Round your answers to 0 decimal places.)
1-Increase selling price ..... ( )
2-Change compensation ....$ ( )
3-Purchase machinery ....$ ( )
Which alternative is the recommended course ofaction?

Transcribed Image Text:

Cost of goods sold Selling expenses Admin expenses S1,208,200 420,900 120,100 1.749,200 S784,900 74.800 49,600 909,300 $423,300 346,100 70,500 839,900