Fredonia inc had a bad year in 2013 for the first time in

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Reference no: EM13571732

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 77,000 units of product: Net sales $1,501,500; total costs and expenses $1,731,500; and net loss $230,000. Costs and expenses consisted of the following.

	Total	Variable	Fixed
Cost of goods sold	$1,206,100	$782,600	$423,500
Selling expenses	420,300	73,400	346,900
Administrative expenses	105,100	40,100	65,000
	$1,731,500	$896,100	$835,400

Management is considering the following independent alternatives for 2014.

1.		Increase unit selling price 22% with no change in costs and expenses.
2.		Change the compensation of salespersons from fixed annual salaries totaling $202,500 to total salaries of $35,000 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 2014.

Break-even point

(b) Compute the break-even point in dollars under each of the alternative courses of action.

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

Reference no: EM13571732

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