Midlands Inc. had a bad year in 2019. For the first time in its history, it...

  

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Midlands 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 78,000 units of product: net sales $1,560,000; total costs and expenses $1,935,960; and net loss $375,960. Costs and expenses consisted of the following. Cost of goods sold Selling expenses Administrative expenses Management is considering the following independent alternatives for 2020. 1. 2. Total Variable Fixed $1,258,000 $785,000 $473,000 524,960 93,000 431,960 153,000 58,000 95,000 $1,935,960 $936,000 $999,960 3. Increase unit selling price 25% with no change in costs and expenses. Change the compensation of salespersons from fixed annual salaries totaling $199,000 to total salaries of $44,990 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 2019. (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 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.) 1. 2. Increase selling price Change compensation 3. Purchase machinery $ LA $ tA Break-even point Which course of action do you recommend? () Midlands 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 78,000 units of product: net sales $1,560,000; total costs and expenses $1,935,960; and net loss $375,960. Costs and expenses consisted of the following. Cost of goods sold Selling expenses Administrative expenses Management is considering the following independent alternatives for 2020. 1. 2. Total Variable Fixed $1,258,000 $785,000 $473,000 524,960 93,000 431,960 153,000 58,000 95,000 $1,935,960 $936,000 $999,960 3. Increase unit selling price 25% with no change in costs and expenses. Change the compensation of salespersons from fixed annual salaries totaling $199,000 to total salaries of $44,990 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 2019. (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 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.) 1. 2. Increase selling price Change compensation 3. Purchase machinery $ LA $ tA Break-even point Which course of action do you recommend? ()

Answer rating: 100% (QA)

Solution Selling Price per unit 156000078000 20 Variable cost per unit 93600078000 12 Contribution m... View the full answer