FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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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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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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