Oriole 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 88,000 units of product: net sales $2,200.000; total costs and expenses $2,458,500; and net loss $258,500. Costs and expenses consisted of the following. Total Variable Fixed Cost of Is sold- $1,724,800 $1,155,000 $569,800 Selling expenses 568,700 101,200 467,500 Administrative expenses 165,000 63,800 101,200 $2,458,500 $1,320,000 $1,138,500 Management is considering the following independent alternatives for 2025. 1. Increase unit selling price 25% with no change in costs and expenses. 2 3 Change the compensation of salespersons from fixed annual salaries totaling $220,000 to total salaries of $44,000 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 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 O decimal places, eg. 2,510) Break-even point $ (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, eg 2.510) Break-even point 1 Increase selling price $ 2 Change compensation $ 3. Purchase machinery $ Which course of action do you recommend? Save for Later Attempts: 1 of Zusad
Oriole 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 88,000 units of product: net sales $2,200.000; total costs and expenses $2,458,500; and net loss $258,500. Costs and expenses consisted of the following. Total Variable Fixed Cost of Is sold- $1,724,800 $1,155,000 $569,800 Selling expenses 568,700 101,200 467,500 Administrative expenses 165,000 63,800 101,200 $2,458,500 $1,320,000 $1,138,500 Management is considering the following independent alternatives for 2025. 1. Increase unit selling price 25% with no change in costs and expenses. 2 3 Change the compensation of salespersons from fixed annual salaries totaling $220,000 to total salaries of $44,000 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 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 O decimal places, eg. 2,510) Break-even point $ (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, eg 2.510) Break-even point 1 Increase selling price $ 2 Change compensation $ 3. Purchase machinery $ Which course of action do you recommend? Save for Later Attempts: 1 of Zusad
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Oriole 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 88,000 units of product: net sales $2,200.000; total costs and expenses $2,458,500; and net loss
$258,500. Costs and expenses consisted of the following.
Total
Variable
Fixed
Cost of Is sold-
$1,724,800
$1,155,000
$569,800
Selling expenses
568,700
101,200
467,500
Administrative expenses
165,000
63,800
101,200
$2,458,500
$1,320,000 $1,138,500
Management is considering the following independent alternatives for 2025.
1.
Increase unit selling price 25% with no change in costs and expenses.
2
3
Change the compensation of salespersons from fixed annual salaries totaling $220,000 to total salaries of $44,000 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
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 O decimal places, eg. 2,510)
Break-even point
$
(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, eg 2.510)
Break-even point
1
Increase selling price $
2
Change compensation
$
3.
Purchase machinery
$
Which course of action do you recommend?
Save for Later
Attempts: 1 of Zusad
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