Bonita Inc. had a bad year in 2019. For the first time in its history, it...

Transcribed Image Text:

Bonita Inc. had a bad year in 2019. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 76,000 units of product: net sales $1,520,000; total costs and expenses $1,780,000; and net loss $260,000. Costs and expenses consisted of the following. Total Variable Fixed Cost of goods sold $1,115,600 $611,000 $504,600 Selling expenses 515,400 93,000 422,400 Administrative expenses 149,000 56,000 93,000 $1,780,000 $760,000 $1,020,000 Management is considering the following independent alternatives for 2020. 1.Increase unit selling price 25% with no change in costs and expenses. 2. Change the compensation of salespersons from fixed annual salaries totaling $199,000 to total salaries of $35,980 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 2019. (Round contribution margin ratio to 4 decimals places e.g. 0.2512 and final answer to 0 decimal places, e.g. 2,510.} 2020. (Round contribution margin ratio to 3 decimal places e.g. 0.251 and final answers to 0 decimal places, e.g. 2,510.) Break-even point 11. Increase selling price 2. Change compensation 3. Purchase machinery Which course of action do you recommend? Bonita Inc. had a bad year in 2019. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 76,000 units of product: net sales $1,520,000; total costs and expenses $1,780,000; and net loss $260,000. Costs and expenses consisted of the following. Total Variable Fixed Cost of goods sold $1,115,600 $611,000 $504,600 Selling expenses 515,400 93,000 422,400 Administrative expenses 149,000 56,000 93,000 $1,780,000 $760,000 $1,020,000 Management is considering the following independent alternatives for 2020. 1.Increase unit selling price 25% with no change in costs and expenses. 2. Change the compensation of salespersons from fixed annual salaries totaling $199,000 to total salaries of $35,980 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 2019. (Round contribution margin ratio to 4 decimals places e.g. 0.2512 and final answer to 0 decimal places, e.g. 2,510.} 2020. (Round contribution margin ratio to 3 decimal places e.g. 0.251 and final answers to 0 decimal places, e.g. 2,510.) Break-even point 11. Increase selling price 2. Change compensation 3. Purchase machinery Which course of action do you recommend?

Answer rating: 100% (QA)

2019 BreakEven Point 1 Calculate the Contribution Margin Ratio Contribution Margin Ratio Net Sales V... View the full answer