CoP5-3A Dousmann Corp.'s sales slumped badly in 2014. For the first time in its history, itoperated at a loss. The company's income statement showed the following results fromselling 500,000 units of product: sales $2,500,000; total costs and expenses $2,600,000; andnet loss $100,000. Costs and expenses consisted of the amounts shown below.act(LCTotalVariableFixedCost of goods soldSelling expensesAdministrative expenses$2,140,000250,000210,000$1,540,00092,00068,000$600,000158,000142,000$2,600,000$1,700,000$900,000Management 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 $150,000to 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?

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Description: CoP5-3A Dousmann Corp.'s sales slumped badly in 2014. For the first time in its history, itoperated at a loss. The company's income statement showed the following results fromselling 500,000 units of product: sales $2,500,000; total costs and expens

Break even point means a point where firm is neither earning profit nor incurring any loss. For…

Business

Accounting

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?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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