Solution-Determine the selling price per unit

Determine the selling price per unit

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Question - Jay Manufacturing's sales slumped badly in 2019 due to so many people purchasing gifts online. The company's income statement showed the following results from selling 375,000 units of product: Net sales, $1,781,250; total costs and expenses, $2,480,000; and net loss of $698,750. Costs and expenses consisted of the following:

	Total	Variable	Fixed
Cost of goods sold	$1,500,000	$900,000	$600,000
Selling expenses	530,000	25,000	505,000
Administrative expenses	450,000	50,000	400,000
	$2,480,000	$975,000	$1,505,000

Management is considering the following alternative for 2020: Purchase new automated equipment that will change the proportion between variable and fixed costs to 23% variable and 77% fixed.

Instructions -

a) Determine the selling price per unit.

b) Calculate the break-even point in dollars for 2019.

c) Calculate the break-even point in dollars under the alternative course of action for 2020.

d) Which course of action do you recommend? Justify your answer.

Reference no: EM132910246

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Determine the selling price per unit

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