Reference no: EM132019979
Question - A 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 500,000 units of product: sales $2,500,000; total costs and expenses $2,600,000; and net loss $100,000. Costs and expenses consisted of the amounts shown below.
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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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$2,140,000
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$1,540,000
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$600,000
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Selling Expenses
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250,000
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92,000
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158,000
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Administrative Expenses
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210,000
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68,000
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142,000
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$2,600,000
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$1,700,000
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$900,000
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Management is considering two independent alternatives for the 2015.
A. Increase unit selling price 20% with no change in costs, expenses, or sales volume.
B. Change the compensation of salespersons from fixed annual salaries totaling $150,000 to total salaries of $60,000 plus a 5% commission on sale
1. Compute break-even point in dollars for 2014.
2. Compute the breakeven point for each alternative course of action.
3. What course of action do you recommend and why?
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: A Dousmann Corp.'s sales slumped badly in 2014. For the first time in its history, it operated at a loss. Compute break-even point in dollars for 2014
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