Crane Inc. had a bad year in 2021. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 100,800 units of product: net sales $2,520,000; total costs and expenses $ 2,816,100; and net loss $ 296,100. Costs and expenses consisted of the following. Cost of goods sold Selling expenses Administrative expenses 1. 2. Total 3. $1,975,680 $1,323,000 651,420 Variable 189,000 115,920 73,080 Fixed $652,680 535,500 Management is considering the following independent alternatives for 2022. 115,920 $2,816,100 $1,512,000 $1,304,100 Increase unit selling price 25% with no change in costs and expenses. Change the compensation of salespersons from fixed annual salaries totaling $ 252,000 to total salaries of $ 50,400 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
Crane Inc. had a bad year in 2021. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 100,800 units of product: net sales $2,520,000; total costs and expenses $ 2,816,100; and net loss $ 296,100. Costs and expenses consisted of the following. Cost of goods sold Selling expenses Administrative expenses 1. 2. Total 3. $1,975,680 $1,323,000 651,420 Variable 189,000 115,920 73,080 Fixed $652,680 535,500 Management is considering the following independent alternatives for 2022. 115,920 $2,816,100 $1,512,000 $1,304,100 Increase unit selling price 25% with no change in costs and expenses. Change the compensation of salespersons from fixed annual salaries totaling $ 252,000 to total salaries of $ 50,400 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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Crane Inc. had a bad year in 2021. For the first time in its history, it operated at a loss. The company's income statement showed the
following results from selling 100,800 units of product: net sales $ 2,520,000; total costs and expenses $ 2,816,100; and net loss $
296,100. Costs and expenses consisted of the following.
Cost of goods sold
Selling expenses
Administrative expenses
Total
2.
$ 1.975,680
3.
651,420
189,000
$2,816,100
Variable
$ 1,323,000
115,920
73,080
Fixed
$ 652,680
535,500
115,920
Management is considering the following independent alternatives for 2022.
$1,512,000 $ 1,304,100
1. Increase unit selling price 25% with no change in costs and expenses.
Change the compensation of salespersons from annual salaries totaling $ 252,000 to total sa
commission on net sales.
of $ 50,400 plus a 5%
Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to
50:50.
Transcribed Image Text:(a) Compute the break-even point in sales dollars for 2021. (Round contribution margin ratio to 4 decimal places e.g.
answer to O decimal places, e.g. 2,510.)
Break-even point
(b) Compute the break-even point in sales dollars under each of the alternative courses of action for 2022. (Round
ratio to 3 decimal places e.g. 0.251 and final answers to O decimal places, e.g. 2,510.)
1.
$
2.
Increase selling price
Change compensation
3. Purchase machinery
$
$
$
Break-even point
Which course of action do you recommend?
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