Part (b)

Break even point for:

- increase in selling price

- purchase machinery

Your answer is partially correct. Midlands Inc. had a bad year in 2016. 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 $2,340,000; total costs and expenses $1,936,000; and net loss $-404,000. Costs and expenses consisted of the following. Total Variable Fixed Cost of goods sold 1,260,000 $785,000 $475,000 523,000 93,000 430,000 95,000 $1,936,000 $936,000 $ 1,000,000 Selling expenses 153,000 58,000 Management is considering the following independent alternatives for 2017. 1, 2, 3. Increase unit selling price 30% with no change in costs and expenses. Change the compensation of salespersons from fixed annual salaries totaling $ 199,000 to total salaries of $ 45,000 plus a 5% commission on net sales. 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 2017. (Round contribution margin ratio to 2 decimal places eg. 0.25 and final answer to 0 decimal places, eg. 2,510.) Break-evenpoint$ 1,666,667 (b) Compute the break-even point in dollars under each of the alternative courses of action. (Round contribution margin ratio to 4 decimal places eg. 0.2512 and final answers to Odecimal places, eg. 2,510) Break-even point 1. Increase selling price 2. Change compensation $ 3. Purchase machinery 1444,444 1,538,182 1,650,962 Which course of action do you recommend? Alternative 1