Keppel Manufacturing had a bad year in 2012, operating at a loss for the first time in its history. The company’s income statement showed the following results from selling 200,000 units of product: net sales Br.2,000,000; total costs and expenses Br.2,120,000; and net loss Br.120,000. Costs and expenses consisted of the following. Total Variable Fixed Cost of goods sold Br.1,295,000 Br. 975,000 Br.320,000 Selling expenses 575,000 325,000 250,000 Administrative expenses 250,000 Br.2,120,000 100,000 Br.1,400,000 150,000 Br.720,000 Management is considering the following independent alternatives for 2013. Increase unit selling price 30% with no change in costs and Change the compensation of salespersons from fixed annual salaries totaling 170,000 to total salaries of Br.50,000 plus a 6% commission on net sales. Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 40:60. Instructions Compute the break-even point in dollars for Compute the break-even point in dollars under each of the alternative courses of Which course of action do you recommend? (Round to the nearest dollar.) Formulation
Keppel Manufacturing had a bad year in 2012, operating at a loss for the first time in its history. The company’s income statement showed the following results from selling 200,000 units of product: net sales Br.2,000,000; total costs and expenses Br.2,120,000; and net loss Br.120,000. Costs and expenses consisted of the following. Total Variable Fixed Cost of goods sold Br.1,295,000 Br. 975,000 Br.320,000 Selling expenses 575,000 325,000 250,000 Administrative expenses 250,000 Br.2,120,000 100,000 Br.1,400,000 150,000 Br.720,000 Management is considering the following independent alternatives for 2013. Increase unit selling price 30% with no change in costs and Change the compensation of salespersons from fixed annual salaries totaling 170,000 to total salaries of Br.50,000 plus a 6% commission on net sales. Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 40:60. Instructions Compute the break-even point in dollars for Compute the break-even point in dollars under each of the alternative courses of Which course of action do you recommend? (Round to the nearest dollar.) Formulation
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question 3:
Keppel Manufacturing had a bad year in 2012, operating at a loss for the first time in its history. The company’s income statement showed the following results from selling 200,000 units of product: net sales Br.2,000,000; total costs and expenses Br.2,120,000; and net loss Br.120,000. Costs and expenses consisted of the following.
|
|
Total |
Variable |
Fixed |
|
Cost of goods sold |
Br.1,295,000 |
Br. 975,000 |
Br.320,000 |
|
Selling expenses |
575,000 |
325,000 |
250,000 |
|
Administrative expenses |
250,000 Br.2,120,000 |
100,000 Br.1,400,000 |
150,000 Br.720,000 |
Management is considering the following independent alternatives for 2013.
- Increase unit selling price 30% with no change in costs and
- Change the compensation of salespersons from fixed annual salaries totaling 170,000 to total salaries of Br.50,000 plus a 6% commission on net sales.
- Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 40:60.
Instructions
- Compute the break-even point in dollars for
- Compute the break-even point in dollars under each of the alternative courses of Which course of action do you recommend? (Round to the nearest dollar.)
- Formulation
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