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Denny Manufacturing had a bad year 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 75,300 units of product: Net sales $1,445,760; total costs and expenses $1,741,800; and net loss $296,040. Costs and expenses consisted of the following.
Total
Variable
Fixed
Cost of goods sold
$1,206,700
$781,900
$424,800
Selling expenses
423,900
79,400
344,500
Administrative expenses
111,200
50,900
60,300
$1,741,800
$912,200
$829,600
Management is considering the following independent alternatives for 2013.
1.
Increase unit selling price 28% with no change in costs and expenses.
2.
Change the compensation of salespersons from fixed annual salaries totaling $203,000 to total salaries of $36,900 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 2012. (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.)
Increase selling price
Change compensation
Purchase machinery
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