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

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Reference no: EM13587031

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 78,100 units of product: Net sales $1,507,330; total costs and expenses $1,758,000; and net loss $250,670. Costs and expenses consisted of the following

	Total	Variable	Fixed
Cost of goods sold	$1,208,700	$784,000	$424,700
Selling expenses	425,100	75,300	349,800
Administrative expenses	124,200	53,300	70,900
	$1,758,000	$912,600	$845,400

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 $199,100 to total salaries of $36,800 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	$

Reference no: EM13587031

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