Guillen Manufacturing had a bad year in 2011, operating at a loss for the first time in its history. The company's income statement showed the following results from selling 200,000 units of product: net sales $2,000,000; total costs and expenses $2,120,000; and net loss $120,000. Costs and expenses consisted of the following.

Management is considering the following independent alternatives for 2012.
1. Increase unit selling price 30% with no change in costs and expenses.
2. Change the compensation of salespersons from fixed annual salaries totaling $170,000 to total salaries of $50,000 plus a 6% 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 40:60.

Instructions
(a) Compute the break-even point in dollars for 2011.
(b) Compute the break-even point in dollars under each of the alternative courses of action. Which course of action do you recommend? Round to the nearest dollar.

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Fixed TotalVariable Cost of goods sold Seling expenses Administrative expenses $1,295,000 975,000 $320,000 250,000 150,000 575,000 250,000 325,000 100,000 $2,120,000 $1,400,000 $720,000