Oriole Inc. had a bad year in 2021. For the first time in its history, it...
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Oriole 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 70,400 units of product: net sales $1,760,000; total costs and expenses $1,966,800; and net loss $206,800. Costs and expenses consisted of the following. Total Variable Fixed Cost of goods sold $1,379,840 $924,000 $455,840 Selling expenses 454,960 80,960 374,000 Administrative expenses 132,000 51,040 80,960 $1,966,800 $1,056,000 $910,800 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 $176,000 to total salaries of $35,200 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 sales dollars for 2021. (Round contribution margin ratio to 4 decimal places e..g. 0.2512 and final answer to O decimal places, e.g. 2,510.) Break-even point $ (b) Compute the break-even point in sales 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 O decimal places, e.g. 2,510.) Break-even point 1. Increase selling price 2$ 2. Change compensation 2$ 3. Purchase machinery 2$ Which course of action do you recommend? Oriole 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 70,400 units of product: net sales $1,760,000; total costs and expenses $1,966,800; and net loss $206,800. Costs and expenses consisted of the following. Total Variable Fixed Cost of goods sold $1,379,840 $924,000 $455,840 Selling expenses 454,960 80,960 374,000 Administrative expenses 132,000 51,040 80,960 $1,966,800 $1,056,000 $910,800 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 $176,000 to total salaries of $35,200 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 sales dollars for 2021. (Round contribution margin ratio to 4 decimal places e..g. 0.2512 and final answer to O decimal places, e.g. 2,510.) Break-even point $ (b) Compute the break-even point in sales 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 O decimal places, e.g. 2,510.) Break-even point 1. Increase selling price 2$ 2. Change compensation 2$ 3. Purchase machinery 2$ Which course of action do you recommend?
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a Contribution margin C176000010560001760000 40 3D Break even ... 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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