P6.1 (LO 1), AN Lanza SA had a bad year in 2019. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 80,000 units of product: net sales R$2,000,000: total costs and expenses R$2.235.000; and net loss R$235.000. Costs and expenses consisted of the following. Cost of goods sold Selling expenses Administrative expenses Total R$1,568,000 $17,000 150,000 R$2.235.000 Variable R$1,050,000 92.000 58,000 R$1,200,000 Fixed R$ 518,000 425.000 92,000 R$1,035,000 Management is considering the following independent alternatives for 2020. 1. Increase unit selling price 25% with no change in costs and expenses. 2. Change the compensation of salespersons from fixed annual salaries totaling R$200,000 to total salaries of R$40,000 plus a 5% commission on net sales. 3. Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50. Instructions a. Compute the break-even point for 2020. b. Compute the break-even point under each of the alternative courses of action. (Round to the nearest real.) Which course of action do you recommend?

P6.1 (LO 1), AN Lanza SA had a bad year in 2019. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 80,000 units of product: net sales R$2,000,000: total costs and expenses R$2.235.000; and net loss R$235.000. Costs and expenses consisted of the following. Cost of goods sold Selling expenses Administrative expenses Total R$1,568,000 $17,000 150,000 R$2.235.000 Variable R$1,050,000 92.000 58,000 R$1,200,000 Fixed R$ 518,000 425.000 92,000 R$1,035,000 Management is considering the following independent alternatives for 2020. 1. Increase unit selling price 25% with no change in costs and expenses. 2. Change the compensation of salespersons from fixed annual salaries totaling R$200,000 to total salaries of R$40,000 plus a 5% commission on net sales. 3. Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50. Instructions a. Compute the break-even point for 2020. b. Compute the break-even point under each of the alternative courses of action. (Round to the nearest real.) 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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