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.
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Total
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Variable
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Fixed
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Cost of goods sold
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$1,206,700
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$781,900
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$424,800
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Selling expenses
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423,900
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79,400
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344,500
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Administrative expenses
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111,200
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50,900
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60,300
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$1,741,800
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$912,200
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$829,600
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Management is considering the following independent alternatives for 2013.
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1.
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Increase unit selling price 28% with no change in costs and expenses.
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2.
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Change the compensation of salespersons from fixed annual salaries totaling $203,000 to total salaries of $36,900 plus a 5% commission on net sales.
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3.
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Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50.
(a) Compute the break-even point in dollars for 2012. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and final answers to 0 decimal places, e.g. 2,510.)
(b) Compute the break-even point in dollars under each of the alternative courses of action. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and final answers to 0 decimal places, e.g. 2,510.)
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Break-even point
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1.
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Increase selling price
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$
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2.
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Change compensation
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$
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3.
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Purchase machinery
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$
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