Midlands Inc Had A Bad Year In 2019 For The First Time In Its History It Operated At A Loss The Company S Income Sta 1 (30.81 KiB) Viewed 9 times
Midlands Inc Had A Bad Year In 2019 For The First Time In Its History It Operated At A Loss The Company S Income Sta 2 (16.37 KiB) Viewed 9 times
Midlands Inc. had a bad year in 2019. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 79,000 units of product: net sales $1.580,000; total costs and expenses $1.968.240; and net loss $388,240. Costs and expenses consisted of the following Cost of goods sold Selling expenses Administrative expenses 2. 3. Total $1,307,600 512,640 148,000 Variable $796,000 Break-even point $ 94,000 58,000 $1.968.240 $948,000 Fixed $511,600 Management is considering the following independent alternatives for 2020. 1. Increase unit selling price 25% with no change in costs and expenses. Change the compensation of salespersons from fixed annual salaries totaling $200,000 to total salaries of $43,000 plus a 5% commission on net sales. 418.640 90,000 $1,020,240 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 2019. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and final answer to 0 decimal places, eg. 2,510.)
(b) Compute the break-even point in dollars under each of the alternative courses of action for 2020. (Round contribution margin ratio to 3 decimal places e.g. 0.251 and final answers to O decimal places, e.g. 2,510.) 1. 2. Increase selling price Change compensation 3. Purchase machinery $ $ $ Break-even point Which course of action do you recommend?
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