Reference no: EM13483428

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 78,400 units of product: Net sales $1,536,640; total costs and expenses $1,741,100; and net loss $204,460. Costs and expenses consisted of the following.

		Total		Variable		Fixed
Cost of goods sold		$1,207,800		$783,900		$423,900
Selling expenses		426,300		79,600		346,700
Administrative expenses		107,000		44,100		62,900
		$1,741,100		$907,600		$833,500

 

Management is considering the following independent alternatives for 2014.

1.		Increase unit selling price 21% with no change in costs and expenses.
2.		Change the compensation of salespersons from fixed annual salaries totaling $203,000 to total salaries of $41,500 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. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and final answers to 0 decimal places, e.g. 2,510.)

Break-even point

$

(b) Compute the break-even point in dollars under each of the alternative courses of action. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and final answers to 0 decimal places, e.g. 2,510.)

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