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 585,500 units of product: sales $2,927,500, total costs and expenses $3,036,840, and net loss $109,340. Costs and expenses consisted of the amounts shown below. Cost of goods sold Selling expenses Administrative expenses 1. 2. Total $2,498,180 292,750 245,910 $3,036,840 $2,107,800 Break-even point $ Management is considering the following independent alternatives for 2018. Contribution margin for alternative 1 Increase unit selling price 20% with no change in costs, expenses, and sales volume. Change the compensation of salespersons from fixed annual salaries totaling $175,650 to total salaries of $70,260 plus a 4% commission on sales. Contribution margin for alternative 2 Variable (a) Compute the break-even point in dollars for 2017. (Round final answer to 0 decimal places, e.g. 1,225.) Contribution margin for alternative 1 Fixed (b) Compute the contribution margin under each of the alternative courses of action. (Round final answers to O decimal places, e.g. 1,225.) Contribution margin for alternative 2 $1,920,440 $577,740 107,732 79,628 185,018 Break-even point for alternative 1 $ 166,282 $929,040 Break-even point for alternative 2 $ (b) Compute the contribution margin under each of the alternative courses of action. (Round final answers to O decimal places, e.g. 1.225.) Which course of action do you recommend? % Compute the break-even point in dollars under each of the alternative courses of action. (Round selling price per unit to 2 decimal places, e.g. 5.25 and other calculations to O decimal places, e.g. 20% and also final answers to O decimal places, e.g. 1,225.) % %
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 585,500 units of product: sales $2,927,500, total costs and expenses $3,036,840, and net loss $109,340. Costs and expenses consisted of the amounts shown below. Cost of goods sold Selling expenses Administrative expenses 1. 2. Total $2,498,180 292,750 245,910 $3,036,840 $2,107,800 Break-even point $ Management is considering the following independent alternatives for 2018. Contribution margin for alternative 1 Increase unit selling price 20% with no change in costs, expenses, and sales volume. Change the compensation of salespersons from fixed annual salaries totaling $175,650 to total salaries of $70,260 plus a 4% commission on sales. Contribution margin for alternative 2 Variable (a) Compute the break-even point in dollars for 2017. (Round final answer to 0 decimal places, e.g. 1,225.) Contribution margin for alternative 1 Fixed (b) Compute the contribution margin under each of the alternative courses of action. (Round final answers to O decimal places, e.g. 1,225.) Contribution margin for alternative 2 $1,920,440 $577,740 107,732 79,628 185,018 Break-even point for alternative 1 $ 166,282 $929,040 Break-even point for alternative 2 $ (b) Compute the contribution margin under each of the alternative courses of action. (Round final answers to O decimal places, e.g. 1.225.) Which course of action do you recommend? % Compute the break-even point in dollars under each of the alternative courses of action. (Round selling price per unit to 2 decimal places, e.g. 5.25 and other calculations to O decimal places, e.g. 20% and also final answers to O decimal places, e.g. 1,225.) % %
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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 585,500 units of product: sales $2,927,500, total costs and expenses $3,036,840, and net
loss $109,340. Costs and expenses consisted of the amounts shown below.
Cost of goods sold
Selling expenses
Administrative expenses
2.
Total
$2,498,180
Break-even point $
292,750
245,910
$3,036,840
Contribution margin for alternative 1
Contribution margin for alternative 2
Management is considering the following independent alternatives for 2018.
Contribution margin for alternative 1
1. Increase unit selling price 20% with no change in costs, expenses, and sales volume.
Change the compensation of salespersons from fixed annual salaries totaling $175,650 to total salaries of $70,260 plus a 4%
commission on sales.
Contribution margin for alternative 2
Break-even point for alternative 1
Variable
$1,920,440
eTextbook and Media
107,732
(a) Compute the break-even point in dollars for 2017. (Round final answer to O decimal places, e.g. 1,225.)
79,628
$2,107,800
(b) Compute the contribution margin under each of the alternative courses of action. (Round final answers to O decimal places, e.g. 1,225.)
$
Break-even point for alternative 2 $
Fixed
Which course of action do you recommend?
$577,740
185,018
166,282
$929,040
(b) Compute the contribution margin under each of the alternative courses of action. (Round final answers to O decimal places, e.g. 1,225.)
%
Compute the break-even point in dollars under each of the alternative courses of action. (Round selling price per unit to 2 decimal places,
e.g. 5.25 and other calculations to O decimal places, e.g. 20% and also final answers to O decimal places, e.g. 1,225.)
%
%
%
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