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Cullumber Inc. had a bad year in 2024. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 84,800 units of product: net sales $2,120,000; total costs and expenses $2,369,100; and net loss $249,100. Costs and expenses consisted of the following. Cost of goods sold Selling expenses Administrative expenses 1. 2. 1. 2. 3. Management is considering the following independent alternatives for 2025. Variable $1,662,080 $1,113,000 Break-even point Total $ 548,020 159,000 $2,369,100 $1,272,000 Increase selling price Increase unit selling price 25% with no change in costs and expenses. Change the compensation of salespersons from fixed annual salaries totaling $212,000 to total salaries of $42,400 plus a 5% commission on net sales. (a) Compute the break-even point in sales dollars for 2024. (Round contribution margin ratio to 4 decimal places eg. 0.2512 and final answer to 0 decimal places, e.g. 2,510.) Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50. 3. Purchase machinery 97,520 61,480 (b) Compute the break-even point in sales dollars under each of the alternative courses of action for 2025. (Round contribution margin ratio to 3 decimal places eg. 0.251 and final answers to 0 decimal places, e.g. 2,510.) $ Change compensation $ Fixed $549,080 450,500 97,520 $ $1,097,100 Break-even point Which course of action do you recommend?

Cullumber Inc. had a bad year in 2024. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 84,800 units of product: net sales $2,120,000; total costs and expenses $2,369,100; and net loss $249,100. Costs and expenses consisted of the following. Cost of goods sold Selling expenses Administrative expenses 1. 2. 1. 2. 3. Management is considering the following independent alternatives for 2025. Variable $1,662,080 $1,113,000 Break-even point Total $ 548,020 159,000 $2,369,100 $1,272,000 Increase selling price Increase unit selling price 25% with no change in costs and expenses. Change the compensation of salespersons from fixed annual salaries totaling $212,000 to total salaries of $42,400 plus a 5% commission on net sales. (a) Compute the break-even point in sales dollars for 2024. (Round contribution margin ratio to 4 decimal places eg. 0.2512 and final answer to 0 decimal places, e.g. 2,510.) Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50. 3. Purchase machinery 97,520 61,480 (b) Compute the break-even point in sales dollars under each of the alternative courses of action for 2025. (Round contribution margin ratio to 3 decimal places eg. 0.251 and final answers to 0 decimal places, e.g. 2,510.) $ Change compensation $ Fixed $549,080 450,500 97,520 $ $1,097,100 Break-even point Which course of action do you recommend?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Cullumber Inc. had a bad year in 2024. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 84,800 units of product: net sales $2,120,000; total costs and expenses $2,369,100; and net loss $249,100. Costs and expenses consisted of the following. Cost of goods sold Selling expenses Administrative expenses 1. 2. 2. 3. Total $1,662,080 $1,113,000 Management is considering the following independent alternatives for 2025. Break-even point $ 1. Increase selling price 548,020 159,000 $2,369,100 $1,272,000 $1,097,100 Variable Increase unit selling price 25% with no change in costs and expenses. Change the compensation of salespersons from fixed annual salaries totaling $212,000 to total salaries of $42,400 plus a 5% commission on net sales. 3. Purchase machinery 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 sales dollars for 2024. (Round contribution margin ratio to 4 decimal places eg. 0.2512 and final answer to 0 decimal places, e.g. 2,510.) 97,520 $ Change compensation $ 61,480 Fixed (b) Compute the break-even point in sales dollars under each of the alternative courses of action for 2025. (Round contribution margin ratio to 3 decimal places eg. 0.251 and final answers to O decimal places, e.g. 2,510.) $ $549,080 Which course of action do you recommend? 450,500 97,520 Break-even point
Transcribed Image Text:Cullumber Inc. had a bad year in 2024. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 84,800 units of product: net sales $2,120,000; total costs and expenses $2,369,100; and net loss $249,100. Costs and expenses consisted of the following. Cost of goods sold Selling expenses Administrative expenses 1. 2. 2. 3. Total $1,662,080 $1,113,000 Management is considering the following independent alternatives for 2025. Break-even point $ 1. Increase selling price 548,020 159,000 $2,369,100 $1,272,000 $1,097,100 Variable Increase unit selling price 25% with no change in costs and expenses. Change the compensation of salespersons from fixed annual salaries totaling $212,000 to total salaries of $42,400 plus a 5% commission on net sales. 3. Purchase machinery 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 sales dollars for 2024. (Round contribution margin ratio to 4 decimal places eg. 0.2512 and final answer to 0 decimal places, e.g. 2,510.) 97,520 $ Change compensation $ 61,480 Fixed (b) Compute the break-even point in sales dollars under each of the alternative courses of action for 2025. (Round contribution margin ratio to 3 decimal places eg. 0.251 and final answers to O decimal places, e.g. 2,510.) $ $549,080 Which course of action do you recommend? 450,500 97,520 Break-even point
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