Long Weekend Ltd suffered a severe drop in sales performance for the year ended 30 June 2013. The income statement revealed that net sales were $150,000 with a profit of $310,000. Unit sales were 300,000, and the total costs were $1,190,000. A breakdown of costs and expenses is presented below;

Fixed Variable Total

Cost of sales (includes manufacturing costs) $350,000 $600,000 $950,000

Selling Expenses 108,000 36,000 144,000

Administration Expenses 72,000 24,000 96,000

Total $530,000 $660,000 $1,190,000

In response to the bad result, management is considering a number of options for the year ending 30 June 2014 to try to improve performance. Independent policy options being considered are set out below:

1. Update factory machinery and production methods to adjust the mix of fixed and variable cost of sales (which includes manufacturing costs) to 40% fixed and 60% variable.
2. Increase the selling price by 15%, with no changes to costs and expenses but unit sales will decrease by 10%.
3. Change the manner in which sales staff are renumerated. It is proposed to pay sales staff on the basis of a base salary of $32,000 plus a 5% commission on net sales. The current policy is to pay fixed total salaries of $105,000.

Required

A. Calculate the break-even point in dollars of sales for the year ended 30 June 2013.

B. Calculate the break- even point and profit for each of the options being considered by management.

C. What action should be recommended to management? Explain why?