P5-3A Dousmann Corp.'s sales slumped badly in 2014. 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 goods sold Selling expenses Administrative expenses $2,140,000 250,000 210,000 $1,540,000 92,000 68,000 $600,000 158,000 142,000 $900,000 $2,600,000 $1,700,000 Management is considering the following independent alternatives for 2015. 1. Increase unit selling price 20% with no change in costs, expenses, and sales volume. 2. Change the compensation of salespersons from fixed annual salaries totaling $150,000 to total salaries of $60,000 plus a 5% commission on sales. Instructions (a) Compute the break-even point in dollars for 2014. (b) 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?
P5-3A Dousmann Corp.'s sales slumped badly in 2014. 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 goods sold Selling expenses Administrative expenses $2,140,000 250,000 210,000 $1,540,000 92,000 68,000 $600,000 158,000 142,000 $900,000 $2,600,000 $1,700,000 Management is considering the following independent alternatives for 2015. 1. Increase unit selling price 20% with no change in costs, expenses, and sales volume. 2. Change the compensation of salespersons from fixed annual salaries totaling $150,000 to total salaries of $60,000 plus a 5% commission on sales. Instructions (a) Compute the break-even point in dollars for 2014. (b) 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?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Topic Video
Question

Transcribed Image Text:Co
P5-3A Dousmann Corp.'s sales slumped badly in 2014. For the first 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.
act
(LC
Total
Variable
Fixed
Cost of goods sold
Selling expenses
Administrative expenses
$2,140,000
250,000
210,000
$1,540,000
92,000
68,000
$600,000
158,000
142,000
$2,600,000
$1,700,000
$900,000
Management is considering the following independent alternatives for 2015.
1. Increase unit selling price 20% with no change in costs, expenses, and sales volume.
2. Change the compensation of salespersons from fixed annual salaries totaling $150,000
to total salaries of $60,000 plus a 5% commission on sales.
Instructions
(a) Compute the break-even point in dollars for 2014.
(b) 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?
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 2 steps

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