Quality Furniture Company is operating at almost 100% of capacity. The company expects sales to increase by 25% in 2015. To satisfy the demand for its product, the company is considering two alternatives: The first alternative would increase fixed costs by 15% but not affect variable costs. The second alternative would not affect fixed costs but increase variable costs to 60% of the selling price of the company’s product.

This is Quality Furniture Company’s condensed income statement for 2014:

	Sales Costs:		$3,600,000
	Variable	$1,620,000
	Fixed	330,000	1,950,000
	Income before taxes		$1,650,000

Required:

a. Determine the break-even point in sales dollars for 2015 under each of the alternatives.

b. Determine projected income for 2015 under each of the alternatives.

c. Which alternative would you recommend? Why?