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 selling78,000units of product: net sales $1,560,000; total costs and expenses $1,624,000; and net loss $64,000. Costs and expenses consisted of the following.

Total

Variable

Fixed

Cost of goods sold$948,000$473,000$475,000Selling expenses523,00093,000430,000Administrative expenses153,00058,00095,000$1,624,000$624,000$1,000,000

Management is considering the following independent alternatives for 2017.

1.Increase unit selling price30% with no change in costs and expenses.2.Change the compensation of salespersons from fixed annual salaries totaling $199,000to total salaries of $45,000plus 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 dollars for 2016.(Round contribution margin ratio to 2 decimal places e.g. 0.25 and final answer to 0 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 2017.(Round contribution margin ratio to 4 decimal places e.g. 0.2510 and final answers to 0 decimal places, e.g. 2,510.)

Break-even point

1.Increase selling price$

2.Change compensation$

3.Purchase machinery$

Which course of action do you recommend?

Alternative 1

Alternative 2

Alternative 3