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 76,500 units of product: Net sales $1,522,350; total costs and expenses $1,762,700; and net loss $240,350. Costs and expenses consisted of the following.
|
|
Total
|
|
Variable
|
|
Fixed
|
| Cost of goods sold |
|
$1,208,700 |
|
$784,100 |
|
$424,600 |
| Selling expenses |
|
421,200 |
|
76,000 |
|
345,200 |
| Administrative expenses |
|
132,800 |
|
54,800 |
|
78,000 |
|
|
$1,762,700 |
|
$914,900 |
|
$847,800 |
Management is considering the following independent alternatives for 2014.
| 1. |
|
Increase unit selling price 28% with no change in costs and expenses. |
| 2. |
|
Change the compensation of salespersons from fixed annual salaries totaling $204,600 to total salaries of $44,400 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. |
|
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.)
|