Reference no: EM131746498
Problem - 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 75,000 units of product: net sales $1,500,000; total costs and expenses $1,900,000; and net loss $400,000. Costs and expenses consisted of the following.
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Total
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Variable
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Fixed
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Cost of goods sold
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$1,245,000
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$755,000
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$490,000
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Selling expenses
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510,000
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90,000
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420,000
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Administrative expenses
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145,000
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55,000
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90,000
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$1,900,000
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$900,000
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$1,000,000
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Management is considering the following independent alternatives for 2017.
1. Increase unit selling price 20% with no change in costs and expenses.
2. Change the compensation of salespersons from fixed annual salaries totaling $195,000 to total salaries of $35,000 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 dollars for 2017.
(b) Compute the break-even point in dollars under each of the alternative courses of action.
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: Midlands Inc. had a bad year in 2016. For the first time in its history, it operated at a loss. Compute the break-even point in dollars for 2017
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