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 79,100 units of product: Net sales $1,574,090; total costs and expenses $1,758,400; and net loss $184,310. Costs and expenses consisted of the following.
|
|
Total |
|
Variable |
|
Fixed |
| Cost of goods sold |
|
$1,203,000 |
|
$781,600 |
|
$421,400 |
| Selling expenses |
|
422,400 |
|
79,100 |
|
343,300 |
| Administrative expenses |
|
133,000 |
|
53,200 |
|
79,800 |
|
|
$1,758,400 |
|
$913,900 |
|
$844,500
|
1.Change the compensation of salespersons from fixed annual salaries totaling $196,600 to total salaries of $42,800 plus a 5% commission on net sales.
2.Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50.
3.Compute the break-even point in dollars under each of the alternative courses of action.