Managerial Accounting: Tools for Business Decision Making
7th Edition
ISBN: 9781118334331
Author: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Publisher: WILEY
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Textbook Question
Chapter 6, Problem 6.1AP
Midlands Inc. had a bad year in 2016. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 80,000 units of product: net sales $2,000,000: total costs and expenses $2,235,000: and net loss $235,000. Costs and expenses consisted of the following.
Compute break-even point under alternative courses of action.
(LO 1), AN
Management is considering the following independent alternatives for 2017.
1. Increase unit selling price 25% with no change in costs and expenses.
2. Change the compensation of salespersons from fixed annual salaries totaling $200,000 to total salaries of $40,000 plus a 3% 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.
Instructions
(a) Compute the break-even point in dollars for 2017.
(b) Compute the break-even point in dollars under each of the alternative courses of action. (Round to the nearest dollar.) Which course of action do you recommend?
(b) (2) $2,500,000
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Bovine Company, a wholesale distributor of umbrellas, has been experiencing losses for some time, as shown by its most recent
monthly contribution format income statement:
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Chapter 6 Solutions
Managerial Accounting: Tools for Business Decision Making
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