Reference no: EM13595565

Gorham Manufacturing's sales slumped badly in 2012. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 600,000 units of product: Net sales $2,400,000; total costs and expenses $2,540,000; and net loss $140,000. Costs and expenses consisted of the amounts shown below.

		Total		Variable		Fixed
	Cost of goods sold	$2,100,000		$1,440,000		$660,000
	Selling expenses	240,000		72,000		168,000
	Administrative expenses	200,000		48,000		152,000
		$2,540,000		$1,560,000		$980,000

Management is considering the following independent alternatives for 2013.

1. Increase unit selling price 20% with no change in costs, expenses, and sales volume.
2. Change the compensation of salespersons from fixed annual salaries totaling $150,000 to total salaries of $60,000 plus a 3% commission on net sales.
3. Purchase new automated equipment that will change the proportion between variable and fixed cost of goods sold to 54% variable and 46% fixed.

Q: 1.Compute the break-even point in dollars for 2012. <-- I got this $2,800,000

2.Compute the break-even point in dollars under each of the alternative courses of action.(Round ratios and final answers to 0 decimal places, e.g. 125.)

3.Which course of action do you recommend?