Werner Manufacturing had a bad year in 2012. For the first time in its history, it...

 

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Werner Manufacturing had a bad year in 2012. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 60,000 units of product: Net sales $1,500,000; total costs and expenses $1,890,000; and net loss $390,000. Costs and expenses consisted of the amounts shown below. Cost of goods sold Selling expenses Administrative expenses Total Variable Fixed $1,350,000 $ 930,000 $420,000 420,000 65,000 355,000 120,000 55,000 65,000 $1,890,000 $1,050,000 $840,000 Management is considering the following independent alternatives for 2013. 1. Increase unit selling price 40% with no change in costs, expenses, and sales volume. 2. Change the compensation of salespersons from fixed annual salaries totaling $200,000 to total salaries of $30,000 plus a 4% 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. Instructions (a) Compute the break-even point in dollars for 2012. (b) Compute the break-even point in dollars under each of the alternative courses of action. Which course of action do you recommend? Werner Manufacturing had a bad year in 2012. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 60,000 units of product: Net sales $1,500,000; total costs and expenses $1,890,000; and net loss $390,000. Costs and expenses consisted of the amounts shown below. Cost of goods sold Selling expenses Administrative expenses Total Variable Fixed $1,350,000 $ 930,000 $420,000 420,000 65,000 355,000 120,000 55,000 65,000 $1,890,000 $1,050,000 $840,000 Management is considering the following independent alternatives for 2013. 1. Increase unit selling price 40% with no change in costs, expenses, and sales volume. 2. Change the compensation of salespersons from fixed annual salaries totaling $200,000 to total salaries of $30,000 plus a 4% 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. Instructions (a) Compute the break-even point in dollars for 2012. (b) Compute the break-even point in dollars under each of the alternative courses of action. Which course of action do you recommend?

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a Comp ute the break even point in dollars for 2012 ANS WER 1 350 000 C AL C UL ATION Total costs an... View the full answer