Cruz Manufacturing had a bad year in 2010. For the first time in its history it operated

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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


Cruz Manufacturing had a bad year in 2010. For the


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?

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...
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Related Book For  answer-question

Managerial Accounting Tools for business decision making

ISBN: 978-0470477144

5th edition

Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso

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