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?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Please do not give solution in image format thanku
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
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education