Concord Inc. had a bad year in 2019. For the first time in its history, it...
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Concord 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 77.000 units of product: net sales $1.540,000; total costs and expenses $1.794,800; and net loss $254,800. Costs and expenses consisted of the following. Total Variable Fixed Cost of goods sold $1.112.800 $618,000 $494,800 Selling expenses 529,000 92,000 437,000 Administrative expenses 153,000 60,000 93,000 $1.794,800 $770,000 $1.024,800 Management is considering the following independent alternatives for 2020. 1. Increase unit selling price 25% with no change in costs and expenses. Change the compensation of salespersons from fixed annual salaries totaling $201.000 to total salaries of $36,015 plus a 5% commission on net sales. 2. 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 decimal places e.g. 0.2512 and final answer to 0 decimal places, e.g. 2,510.) Break-even point (b) Compute the break-even point in dollars under each of the alternative courses of action for 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 1. Increase selling price 2. Change compensation 3. Purchase machinery Which course of action do you recommend? Concord 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 77.000 units of product: net sales $1.540,000; total costs and expenses $1.794,800; and net loss $254,800. Costs and expenses consisted of the following. Total Variable Fixed Cost of goods sold $1.112.800 $618,000 $494,800 Selling expenses 529,000 92,000 437,000 Administrative expenses 153,000 60,000 93,000 $1.794,800 $770,000 $1.024,800 Management is considering the following independent alternatives for 2020. 1. Increase unit selling price 25% with no change in costs and expenses. Change the compensation of salespersons from fixed annual salaries totaling $201.000 to total salaries of $36,015 plus a 5% commission on net sales. 2. 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 decimal places e.g. 0.2512 and final answer to 0 decimal places, e.g. 2,510.) Break-even point (b) Compute the break-even point in dollars under each of the alternative courses of action for 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 1. Increase selling price 2. Change compensation 3. Purchase machinery Which course of action do you recommend?
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Total Per unit Units 77000 Net Sales Variable costs Contribution margin 1540000 770000 77... View the full answer
Related Book For
Managerial Economics and Business Strategy
ISBN: 978-0071267441
7th Edition
Authors: Michael R. baye
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