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Provide the following: Compute and explain the break-even point in sales dollars for 2022. Compute and explain the break-even point in sales dollars under each of the alternative courses of action. What course of action do you recommend and why?

Provide the following: Compute and explain the break-even point in sales dollars for 2022. Compute and explain the break-even point in sales dollars under each of the alternative courses of action. What course of action do you recommend and why?

FINANCIAL ACCOUNTING
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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Please answer completely and correctly with explanation computation formula steps answer in text no copy paste from other answers show explanation and computation clearly for numbers provide full working for all steps with explanation answer in text form
Topic: The Break-even Point You will discuss how cost behavior helps management plan operations and decide between alternative courses of action. You will also see how important variable costs and fixed costs are in determining the total costs under the high-low method, calculating the break-even point, and completing the cost-volume-profit analysis. Scenarlo: DessertsPlus Inc. was founded 2 years ago and has had declining sales for the past 2 years: The most recent income statement for 2022 shows the following results selling 104,535 units which resulted in sales of $2,404,305: DessertsPlus Income Statement: 2022 Cost of goods sold Selling expenses Administrative expenses Total $2,120,000 245,920 197,160 Varlable $1,591,655 $528,345 90,990 Fixed 67,034 154,930 130,126 $2,563,080 $1,749,679 $813,401 The owners are considering the following independent alternatives going forward for the coming year. 1. Increasing the unit prices by either 15% and 20% without changing selling and administrative expenses. 2. Moving their business to a less expensive lease location saving the company $120,000 per year. 3. Change the compensation of sales personnel from fixed annual salaries totaling $150,000 to total salaries of $60,000 plus 4% commission on sales. All other total costs total expenses and total sales remain unchanged. Provide the following: • Compute and explain the break-even point in sales dollars for 2022. Compute and explain the break-even point in sales dollars under each of the alternative courses of action. • What course of action do you recommend and why?
Transcribed Image Text:Topic: The Break-even Point You will discuss how cost behavior helps management plan operations and decide between alternative courses of action. You will also see how important variable costs and fixed costs are in determining the total costs under the high-low method, calculating the break-even point, and completing the cost-volume-profit analysis. Scenarlo: DessertsPlus Inc. was founded 2 years ago and has had declining sales for the past 2 years: The most recent income statement for 2022 shows the following results selling 104,535 units which resulted in sales of $2,404,305: DessertsPlus Income Statement: 2022 Cost of goods sold Selling expenses Administrative expenses Total $2,120,000 245,920 197,160 Varlable $1,591,655 $528,345 90,990 Fixed 67,034 154,930 130,126 $2,563,080 $1,749,679 $813,401 The owners are considering the following independent alternatives going forward for the coming year. 1. Increasing the unit prices by either 15% and 20% without changing selling and administrative expenses. 2. Moving their business to a less expensive lease location saving the company $120,000 per year. 3. Change the compensation of sales personnel from fixed annual salaries totaling $150,000 to total salaries of $60,000 plus 4% commission on sales. All other total costs total expenses and total sales remain unchanged. Provide the following: • Compute and explain the break-even point in sales dollars for 2022. Compute and explain the break-even point in sales dollars under each of the alternative courses of action. • What course of action do you recommend and why?
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