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Calculate the break-even point under alternative courses of action. P6.57B (LO 2, 4) Delgado Manufacturing's sales slumped badly in 2022. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 500,000 units of product: net sales $2.5 million, total costs and expenses $2.6 million, and operating loss $100,000. Costs and expenses were as follows: Total Variable Fixed Cost of goods $2,140,000 $1,540,000 $600,000 sold Selling 250,000 92,000 158,000 expenses Administrative 210,000 68,000 142,000 expenses $2,600,000 $1,700,000 $900,000 Management is considering the following independent alternatives for 2023: 1. Increase the unit selling price by 40% with no change in costs and expenses. 2. Change the compensation of salespersons from fixed annual salaries totalling $150,000 to total salaries of $60,000 plus a 5% commission on net sales. Instructions a. Calculate the break-even point in dollars for 2022. b. Calculate the break-even point in dollars under each of the alternative courses of action. (Round to nearest full percent for contribution margin ratio.) Which course of action do you recommend? b. Alternative 1, $1,764,706

Calculate the break-even point under alternative courses of action. P6.57B (LO 2, 4) Delgado Manufacturing's sales slumped badly in 2022. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 500,000 units of product: net sales $2.5 million, total costs and expenses $2.6 million, and operating loss $100,000. Costs and expenses were as follows: Total Variable Fixed Cost of goods $2,140,000 $1,540,000 $600,000 sold Selling 250,000 92,000 158,000 expenses Administrative 210,000 68,000 142,000 expenses $2,600,000 $1,700,000 $900,000 Management is considering the following independent alternatives for 2023: 1. Increase the unit selling price by 40% with no change in costs and expenses. 2. Change the compensation of salespersons from fixed annual salaries totalling $150,000 to total salaries of $60,000 plus a 5% commission on net sales. Instructions a. Calculate the break-even point in dollars for 2022. b. Calculate the break-even point in dollars under each of the alternative courses of action. (Round to nearest full percent for contribution margin ratio.) Which course of action do you recommend? b. Alternative 1, $1,764,706

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Calculate the break-even point under alternative courses of action. P6.57B (LO 2, 4) Delgado Manufacturing's sales slumped badly in 2022. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 500,000 units of product: net sales $2.5 million, total costs and expenses $2.6 million, and operating loss $100,000. Costs and expenses were as follows: Total Variable Fixed Cost of goods $2,140,000 $1,540,000 $600,000 sold Selling 250,000 92,000 158,000 expenses Administrative 210,000 68,000 142,000 expenses $2,600,000 $1,700,000 $900,000 Management is considering the following independent alternatives for 2023: 1. Increase the unit selling price by 40% with no change in costs and expenses. 2. Change the compensation of salespersons from fixed annual salaries totalling $150,000 to total salaries of $60,000 plus a 5% commission on net sales. Instructions a. Calculate the break-even point in dollars for 2022. b. Calculate the break-even point in dollars under each of the alternative courses of action. (Round to nearest full percent for contribution margin ratio.) Which course of action do you recommend? b. Alternative 1, $1,764,706
Transcribed Image Text:Calculate the break-even point under alternative courses of action. P6.57B (LO 2, 4) Delgado Manufacturing's sales slumped badly in 2022. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 500,000 units of product: net sales $2.5 million, total costs and expenses $2.6 million, and operating loss $100,000. Costs and expenses were as follows: Total Variable Fixed Cost of goods $2,140,000 $1,540,000 $600,000 sold Selling 250,000 92,000 158,000 expenses Administrative 210,000 68,000 142,000 expenses $2,600,000 $1,700,000 $900,000 Management is considering the following independent alternatives for 2023: 1. Increase the unit selling price by 40% with no change in costs and expenses. 2. Change the compensation of salespersons from fixed annual salaries totalling $150,000 to total salaries of $60,000 plus a 5% commission on net sales. Instructions a. Calculate the break-even point in dollars for 2022. b. Calculate the break-even point in dollars under each of the alternative courses of action. (Round to nearest full percent for contribution margin ratio.) Which course of action do you recommend? b. Alternative 1, $1,764,706
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