Calculate break even points to find Increasing selling price, change compensation, and purchase machinery

Description

Calculate break even points to find Increasing selling price, change compensation, and purchase machinery

answer the 3 questions in part B

see the attachment

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 77,000 units of product: net
sales $1,540,000; total costs and expenses $1,636,000; and net loss $96,000. Costs and expenses consisted of the following.
Total
Fixed
Cost of goods sold
Selling expenses
Administrative expenses
$967,000
520,000
149,000
$1,636,000
Variable
$466,000
94,000
56,000
$616,000
$501,000
426,000
93,000
$1,020,000
Management is considering the following independent alternatives for 2017.
1. Increase unit selling price 25% with no change in costs and expenses.
2. Change the compensation of salespersons from fixed annual salaries totaling $197,000 to total salaries of $40,000 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 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
1700,000
(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
O decimal places, e.g. 2,510.)
Break-even point
X
1. Increase selling price
1514167
X
2. Change compensation
X
3. Purchase machinery

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