Blossom Corps 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 500.500 units of product: sales $2,502,500, total costs and expenses $2,615,550, and net loss $113,050. Costs and expenses consisted of the following amounts. Cost of goods sold Selling expenses Administrative expenses 1 Total $2,155,090 250,250 210,210 2 $2,615,550 Variable Fixed $1,491,490 $663.600 158,158 142,142 92,092 68,068 $1,651,650 Management is considering the following independent alternatives for 2023. Increase the unit selling price 20% with no change in total costs, total expenses, and sales volume. Change the compensation of sales personnel from fixed annual salaries totaling $150,150 to total salaries of $60,060 plus a 6% commission on sales, All other total costs, total expenses, and total sales remain unchanged. $963,900
Blossom Corps 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 500.500 units of product: sales $2,502,500, total costs and expenses $2,615,550, and net loss $113,050. Costs and expenses consisted of the following amounts. Cost of goods sold Selling expenses Administrative expenses 1 Total $2,155,090 250,250 210,210 2 $2,615,550 Variable Fixed $1,491,490 $663.600 158,158 142,142 92,092 68,068 $1,651,650 Management is considering the following independent alternatives for 2023. Increase the unit selling price 20% with no change in total costs, total expenses, and sales volume. Change the compensation of sales personnel from fixed annual salaries totaling $150,150 to total salaries of $60,060 plus a 6% commission on sales, All other total costs, total expenses, and total sales remain unchanged. $963,900
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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
Transcribed Image Text:Blossom Corp'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 500.500 units of product: sales $2,502,500, total costs and expenses $2,615,550, and net
loss $113,050. Costs and expenses consisted of the following amounts.
Cost of goods sold
Selling expenses
Administrative expenses
Total
2
Variable
$1,491,490
$2,155,090
$663,600
250,250
158,158
210,210
142,142
$2,615,550 $1,651,650 $963,900
Fixed
92,092
68,068
Management is considering the following independent alternatives for 2023.
1. Increase the unit selling price 20% with no change in total costs, total expenses, and sales volume.
Change the compensation of sales personnel from fixed annual salaries totaling $150,150 to total salaries of $60,060 plus
a 6% commission on sales, All other total costs, total expenses, and total sales remain unchanged.

Transcribed Image Text:Compute the contribution margin ratio under each of the alternative courses of action.
Contribution margin ratio for alternative 1
Contribution margin ratio for alternative 2
Break-even point for alternative 1 $
Compute the break-even point in sales dollars under each of the alternative courses of action.
Break-even point for alternative 2
$
Which course of action do you recommend?
eTextbook and Media.
%
Alternative 1
Alternative 2
%
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