Reference no: EM13571732

Fredonia Inc. had a bad year in 2013. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 77,000 units of product: Net sales $1,501,500; total costs and expenses $1,731,500; and net loss $230,000. Costs and expenses consisted of the following.

		Total		Variable		Fixed
Cost of goods sold		$1,206,100		$782,600		$423,500
Selling expenses		420,300		73,400		346,900
Administrative expenses		105,100		40,100		65,000
		$1,731,500		$896,100		$835,400

Management is considering the following independent alternatives for 2014.

1.		Increase unit selling price 22% with no change in costs and expenses.
2.		Change the compensation of salespersons from fixed annual salaries totaling $202,500 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 2014.

Break-even point

$

(b) Compute the break-even point in dollars under each of the alternative courses of action.

				Break-even point
1.		Increase selling price		$
2.		Change compensation		$
3.		Purchase machinery		$