Sunland Inc. had a bad year in 2024. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 75,200 units of product: net sales $1,880,000; total costs and expenses $2,100,900; and net loss $220,900. Costs and expenses consisted of the following. Cost of goods sold Selling expenses Administrative expenses 3. Management is considering the following independent alternatives for 2025. 1. Increase unit selling price 25% with no change in costs and expenses. 2. Change the compensation of salespersons from fixed annual salaries totaling $188,000 to total salaries of $37,600 plus a 5% commission on net sales. Break-even point $ 1. Total $1,473,920 485,980 86,480 399,500 141,000 54,520 86,480 $2,100,900 $1,128,000 $972,900 a) Compute the break-even point in sales dollars for 2024. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and final answer to 0 decimal places, e.g. 2,510.) 2. 3. Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50. Variable $987,000 (b) Compute the break-even point in sales dollars under each of the alternative courses of action for 2025. (Round contribution margin ratio to 3 decimal places e.g. 0.251 and final answers to 0 decimal places, e.g. 2,510.) Increase selling price $ Change compensation Purchase machinery Fixed $486,920 $ $ 2,432,250. Break-even point
Sunland Inc. had a bad year in 2024. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 75,200 units of product: net sales $1,880,000; total costs and expenses $2,100,900; and net loss $220,900. Costs and expenses consisted of the following. Cost of goods sold Selling expenses Administrative expenses 3. Management is considering the following independent alternatives for 2025. 1. Increase unit selling price 25% with no change in costs and expenses. 2. Change the compensation of salespersons from fixed annual salaries totaling $188,000 to total salaries of $37,600 plus a 5% commission on net sales. Break-even point $ 1. Total $1,473,920 485,980 86,480 399,500 141,000 54,520 86,480 $2,100,900 $1,128,000 $972,900 a) Compute the break-even point in sales dollars for 2024. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and final answer to 0 decimal places, e.g. 2,510.) 2. 3. Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50. Variable $987,000 (b) Compute the break-even point in sales dollars under each of the alternative courses of action for 2025. (Round contribution margin ratio to 3 decimal places e.g. 0.251 and final answers to 0 decimal places, e.g. 2,510.) Increase selling price $ Change compensation Purchase machinery Fixed $486,920 $ $ 2,432,250. Break-even point
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Sunland Inc. had a bad year in 2024. For the first time in its history, it operated at a loss. The company's income statement showed the
following results from selling 75,200 units of product: net sales $1,880,000; total costs and expenses $2,100,900; and net loss
$220,900. Costs and expenses consisted of the following.
Cost of goods sold
Selling expenses
Administrative expenses
1.
2.
3.
Management is considering the following independent alternatives for 2025.
Break-even point $
1.
2.
Total
$1,473,920
485,980
3.
141,000
$2,100,900
(a) Compute the break-even point in sales dollars for 2024. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and
final answer to O decimal places, e.g. 2,510.)
Increase unit selling price 25% with no change in costs and expenses.
Change the compensation of salespersons from fixed annual salaries totaling $188,000 to total salaries of $37,600 plus a 5%
commission on net sales.
Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to
50:50.
Increase selling price
Change compensation
(b) Compute the break-even point in sales dollars under each of the alternative courses of action for 2025. (Round contribution
margin ratio to 3 decimal places e.g. 0.251 and final answers to 0 decimal places, e.g. 2,510.)
Purchase machinery
Variable
$987,000
86,480
54,520
$1,128,000
$
$
Fixed
$486,920
399,500
86,480
$972,900
$
2,432,250.
Break-even point
Which course of action do you recommend?
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