Dousmann Corp.’s sales slumped badly in 2014. For the fi rst 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: sales $2,500,000; total costs and expenses $2,600,000; and net loss $100,000. Costs and expenses consisted of the amounts shown below. Total Variable Fixed Cost of good sold 2140000 1540000 600000 Selling expense 250000 92000 158000 Administrative expenses 210000 68000 142000 2600000 1700000 900000 Management is considering the following independent alternatives for 2015. Increase unit selling price 20% with no change in costs, expenses, and sales volume. Change the compensation of salespersons from fi xed annual salaries totaling $150,000 to total salaries of $60,000 plus a 5% commission on sales. Instructions Compute the break-even point in dollars for 2014. Compute the break-even point in dollars under each of the alternative courses of action. (Round all ratios to nearest full percent.) Which course of action do you recommend
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
P5-3A Dousmann Corp.’s sales slumped badly in 2014. For the fi rst 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: sales $2,500,000; total costs and expenses $2,600,000; and net loss $100,000. Costs and expenses consisted of the amounts shown below.
| Total | Variable | Fixed | |
| Cost of good sold | 2140000 | 1540000 | 600000 |
| Selling expense | 250000 | 92000 | 158000 |
| Administrative expenses | 210000 | 68000 | 142000 |
| 2600000 | 1700000 | 900000 |
Management is considering the following independent alternatives for 2015.
- Increase unit selling price 20% with no change in costs, expenses, and sales volume.
- Change the compensation of salespersons from fi xed annual salaries totaling $150,000 to total salaries of $60,000 plus a 5% commission on sales.
Instructions
- Compute the break-even point in dollars for 2014.
- Compute the break-even point in dollars under each of the alternative courses of action. (Round all ratios to nearest full percent.) Which course of action do you recommend
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