Your answer is partially correct Try again Tanek Corps sales

Your answer is partially correct. Try again Tanek Corp.\'s sales slumped badly in 2017. For the first time in its history, it operated at a loss. The company\'s income statement showed the following results from selling 590,500 units of product: sales $2,952,500, total costs and expenses $3,070,600, and net loss $118,100. Costs and expenses consisted of the amounts shown below Total Variable Cost of goods sold Selling expenses Administrative expenses $2,527,340 $1,877,790 108,652 80,308 $649,550 186,598 167,702 $3,070,600 $2,066,750 $1,003,850 295,250 248,010 Management is considering the following independent alternatives for 2018 1. Increase unit selling price 20% with no change in costs, expenses, and sales volume 2. Change the compensation of salespersons from fixed annual salaries totaling $177,150 to total salaries of $70,860 plus a 6% commission on sales. (a) Compute the break-even point in dollars for 2017. (Round final answer to O decimal places, e.g. 1,225.) Break-even point 669,233 (b) Compute the contribution margin under each of the alternative courses of action. (Round final answer to o decimal places, e.g. 1,225.) Contribution margin for alternative 1 Contribution margin for alternative 2 41.67 0% 24

Solution

590500 Units PU Sales 2952500 5.00 Variable Costs 2066750 3.50 Contribution Margin 885750 1.50 Fixed Costs 1003850 - NOI -118100 - Contribution Margin Ratio 30.00% (Contribution Margin/Sales) (a) BEP in Dollars: Fixed Cost 1003850 A Contribution Margin Ratio 30.00% B BEP in Dollars 3346167 A/B (b) CM Ratio: Alt 1 Alt 2 Alt 1 Alt 2 Sales 6.00 5.00 (5*120%) Same Variable Costs 3.50 3.80 Same 3.50+(5*6%) Contribution Margin 2.50 1.20 Contribution Margin Ratio 41.67% 24.00% (Contribution Margin/Sales) Alt 1 Alt 2 Alt 1 Alt 2 Fixed Cost 1003850 897560 A Same 1003850+70860-177150 Contribution Margin Ratio 41.67% 24.00% B CM Ratio CM Ratio BEP in Dollars 2409240 3739833 A/B Alternative 1 Since it has low BEP