Compute the break-even point in dollars under each of the

Reference no: EM13581263

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 75,600 units of product: Net sales $1,474,200; total costs and expenses $1,733,900; and net loss $259,700. Costs and expenses consisted of the following.

	Total	Variable	Fixed
Cost of goods sold	$1,198,800	$775,800	$423,000
Selling expenses	422,600	72,800	349,800
Administrative expenses	112,500	42,800	69,700
	$1,733,900	$891,400	$842,500

Management is considering the following independent alternatives for 2013.

1.		Increase unit selling price 22% with no change in costs and expenses.
2.		Change the compensation of salespersons from fixed annual salaries totaling $204,900 to total salaries of $38,000 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.)

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

Which course of action do you recommend? Alternative 1 Alternative 2 Alternative 3

Reference no: EM13581263

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