Oriole Inc. had a bad year in 2026. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 70,400 units of product: net sales $1,760,000; total costs and expenses $1,966,800; and net loss $206,800. Costs and expenses consisted of the following. Total Variable Fixed Cost of goods sold $1,379,840 $924,000 $455,840 Selling expenses 454,960 80,960 374,000 Administrative expenses 132,000 51,040 80,960 $1,966,800 $1,056,000 $910,800 Management is considering the following independent alternatives for 2022. 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 $176,000 to total salaries of $35,200 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 2026. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and final answer to 0 decimal places, e.g. 2,510.) Break-even point $ (b) Compute the break-even point in sales dollars under each of the alternative courses of action for 2022. (Round contribution margin ratio to 3 decimal places e.g. 0.251 and final answers to O decimal places, e.g. 2,510.) Break-even point 1. Increase selling price $ 2. Change compensation $ 3. Purchase machinery $ Which course of action do you recommend?
Oriole Inc. had a bad year in 2026. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 70,400 units of product: net sales $1,760,000; total costs and expenses $1,966,800; and net loss $206,800. Costs and expenses consisted of the following. Total Variable Fixed Cost of goods sold $1,379,840 $924,000 $455,840 Selling expenses 454,960 80,960 374,000 Administrative expenses 132,000 51,040 80,960 $1,966,800 $1,056,000 $910,800 Management is considering the following independent alternatives for 2022. 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 $176,000 to total salaries of $35,200 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 2026. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and final answer to 0 decimal places, e.g. 2,510.) Break-even point $ (b) Compute the break-even point in sales dollars under each of the alternative courses of action for 2022. (Round contribution margin ratio to 3 decimal places e.g. 0.251 and final answers to O decimal places, e.g. 2,510.) Break-even point 1. Increase selling price $ 2. Change compensation $ 3. Purchase machinery $ Which course of action do you recommend?
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 2026. For the first time in its history, it operated at a loss. The company's income
statement showed the following results from selling 70,400 units of product: net sales $1,760,000; total costs
and expenses $1,966,800; and net loss $206,800. Costs and expenses consisted of the following.
Total
Variable
Fixed
Cost of goods sold
$1,379,840
$924,000 $455,840
Selling expenses
454,960
80,960
374,000
Administrative expenses
132,000
51,040
80,960
$1,966,800
$1,056,000 $910,800
Management is considering the following independent alternatives for 2022.
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 $176,000 to total salaries
of $35,200 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 2026. (Round contribution margin ratio to 4 decimal
places e.g. 0.2512 and final answer to 0 decimal places, e.g. 2,510.)
Break-even point
$
(b) Compute the break-even point in sales dollars under each of the alternative courses of action for 2022.
(Round contribution margin ratio to 3 decimal places e.g. 0.251 and final answers to O decimal places,
e.g. 2,510.)
Break-even point
1.
Increase selling price
$
2.
Change compensation
$
3.
Purchase machinery
$
Which course of action do you recommend?
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