Cullumber Inc. had a bad year in 2021. For the first time in its history, it...
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Cullumber Inc. had a bad year in 2021. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 78,000 units of product: net sales $1,560,000; total costs and expenses $1,976,000; and net loss $416,000. Costs and expenses consisted of the following. Total Variable Fixed Cost of goods sold $1,320,400 $785,000 $535,400 Selling expenses 504,600 91,000 413,600 Administrative expenses 151,000 60,000 91,000 $1,976,000 $936,000 $1,040,000 Management is considering the following independent alternatives for 2022. 1. Increase unit selling price 25% with no change in costs and expenses. 2. Change the compensation of salespersons from fixed annual salaries totaling $197,000 to total salaries of $42,010 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 2021. (Round contribution margin ratio to 2 decimal places e.g. O.25 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 2022. (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 2$ 3. Purchase machinery $ Which course of action do you recommend? Cullumber Inc. had a bad year in 2021. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 78,000 units of product: net sales $1,560,000; total costs and expenses $1,976,000; and net loss $416,000. Costs and expenses consisted of the following. Total Variable Fixed Cost of goods sold $1,320,400 $785,000 $535,400 Selling expenses 504,600 91,000 413,600 Administrative expenses 151,000 60,000 91,000 $1,976,000 $936,000 $1,040,000 Management is considering the following independent alternatives for 2022. 1. Increase unit selling price 25% with no change in costs and expenses. 2. Change the compensation of salespersons from fixed annual salaries totaling $197,000 to total salaries of $42,010 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 2021. (Round contribution margin ratio to 2 decimal places e.g. O.25 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 2022. (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 2$ 3. Purchase machinery $ Which course of action do you recommend?
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Answer rating: 100% (QA)
a Given Sales Revenue 1560000 Total Variable Fixed Cost of goods sold 1320400 785000 535400 Selling expenses 504600 91000 413600 Administrative expenses 151000 60000 91000 1976000 936000 1040000 Calcu... View the full answer
Related Book For
Managerial Economics and Business Strategy
ISBN: 978-0071267441
7th Edition
Authors: Michael R. baye
Posted Date:
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