Tanek Corp.’s sales slumped badly in 2022. 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: sales $2,500,000, total costs and expenses $2,590,000, and net loss $90,000. Costs and expenses consisted of the following amounts.

Management is considering the following independent alternatives for 2023.

1. Increase the unit selling price 20% with no change in total costs, total expenses, and sales volume.

2. Change the compensation of sales personnel from fixed annual salaries totaling $140,000 to total salaries of $60,000 plus a 5% commission on sales. All other total costs, total expenses, and total sales remain unchanged.

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Total Variable Fixed $2,140,000 Cost of goods sold Selling expenses Administrative expenses $1,590,000 $550,000 250,000 92,000 158,000 200,000 68,000 132,000 $2,590,000 $1,750,000 $840,000