Pharoah Manufacturing's sales slumped badly in 2022. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 54,000 units of product: net sales $1,620,000; total costs and expenses $1,809,000; and net loss $189.000. Costs and expenses consisted of the amounts shown below: Cost of goods sold Selling expenses Administrative expenses Total $1,215,000 432,000 162,000 $1,809,000 Variable $837,000 112,500 103,500 $1,053,000 Fixed $378,000 319,500 58,500 $756,000 Management is considering the following independent alternatives for 2023: 1. Increase the unit selling price by 25% with no change in costs, expenses, or sales volume. 2. Change the compensation of salespersons from fixed annual salaries totalling $180,000 to total salaries of $18,000 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.

Pharoah Manufacturing's sales slumped badly in 2022. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 54,000 units of product: net sales $1,620,000; total costs and expenses $1,809,000; and net loss $189.000. Costs and expenses consisted of the amounts shown below: Cost of goods sold Selling expenses Administrative expenses Total $1,215,000 432,000 162,000 $1,809,000 Variable $837,000 112,500 103,500 $1,053,000 Fixed $378,000 319,500 58,500 $756,000 Management is considering the following independent alternatives for 2023: 1. Increase the unit selling price by 25% with no change in costs, expenses, or sales volume. 2. Change the compensation of salespersons from fixed annual salaries totalling $180,000 to total salaries of $18,000 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.

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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