2023 Fredonia Inc had a bad year in 2013 For the first time in its history it operated

Business Finance 2023 Fredonia Inc. Had A Bad Year In 2013. For The First Time In Its History, It Operated At A Loss….

Fredonia Inc had a bad year in 2013 For the first time in its history it operated 2023

Fredonia Inc. had a bad year in 2013. For the first time in its history, it operated at a loss. The company’s income statement showed the following results from selling 78,000 units of product: Net sales $1,536,600; total costs and expenses $1,740,200; and net loss $203,600. Costs and expenses consisted of the following.

		Total		Variable		Fixed
Cost of goods sold		$1,202,800		$780,600		$422,200
Selling expenses		423,500		78,900		344,600
Administrative expenses		113,900		52,700		61,200
		$1,740,200		$912,200		$828,000

Management is considering the following independent alternatives for 2014.

1.		Increase unit selling price 29% with no change in costs and expenses.
2.		Change the compensation of salespersons from fixed annual salaries totaling $203,800 to total salaries of $43,200 plus a 5% 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.

(a) Compute the break-even point in dollars for 2014. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and final answers to 0 decimal places, e.g. 2,510.)

Break-even point

$[removed]2038950

(b) Compute the break-even point in dollars under each of the alternative courses of action. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and final answers to 0 decimal places, e.g. 2,510.)

				Break-even point
1.		Increase selling price		$[removed]2629935
2.		Change compensation		$[removed]
3.		Purchase machinery		$[removed]

Which course of action do you recommend?

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