Question

CVP Analysis

Unique Manufacturing had a bad year in 2007. Having operated at a loss. The income statement showed the following results from selling 60,000: net sales $2,250,000, total costs and expenses $2,835,000; and loss $385,000. Costs and expenses consisted of the following

                                                                Total                      variable               fixed

Cost of Goods sold                                       2,025,000             1,395,000             $630,000

Selling Expenses                                            630,000                 110,000               520,000

Administrative expenses                                 180,000                   70,000                110,000

Total                                                         2,835,000             1,575,000             1,260,000

Management is considering the following independent alternatives for 2008

1. Increase the unit selling price to $52.50 with  no change in costs , expenses and sales volume
2. Change in compensation of salespersons from fixed annual salaries totalling $300,000 to total salaries of $75,000 plus 5% commission on net sales
3. Purchase new high tech factory that will change the proportion between variable and fixed cost of goods sold to 50:50

Required

a)      Calculate the break -even point for the year 2007

b)      Calculate the break -even point under each alternative course of action above.