Compute the contribution margin under each of the

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Reference no: EM13579638

Dousmann Corp.'s sales slumped badly in 2014. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 654,000 units of product: sales $2,616,000; total costs and expenses $2,768,600; and net loss $152,600. Costs and expenses consisted of the amounts shown below.

	Total	Variable	Fixed
Cost of goods sold	$2,289,000	$1,569,600	$719,400
Selling expenses	261,600	78,480	183,120
Administrative expenses	218,000	52,320	165,680
	$2,768,600	$1,700,400	$1,068,200

Management is considering the following independent alternatives for 2015.

1.		Increase unit selling price 21% with no change in costs, expenses, and sales volume.
2.		Change the compensation of salespersons from fixed annual salaries totaling $163,500 to total salaries of $65,400 plus a 6% commission on sales.

(a) Compute the break-even point in dollars for 2014. (Round final answer to 0 decimal places, e.g. 1,225.)

Break-even point

(b) Compute the contribution margin under each of the alternative courses of action. (Round final answer to 0 decimal places, e.g. 1,225.)

Contribution margin for alternative 1		%
Contribution margin for alternative 2		%

Compute the break-even point in dollars under each of the alternative courses of action. (Round selling price per unit to 2 decimal places, e.g. 5.25 and other calculations to 0 decimal places, e.g. 20% and also final answer to 0 decimal places, e.g. 1,225.)

Break-even point for alternative 1		$
Break-even point for alternative 2		$

Which course of action do you recommend?

Reference no: EM13579638

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