Sheridan Inc. had a bad year in 2021. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 73,600 units of product: net sales $1,840,000; total costs and expenses $2,056,200; and net loss $216,200, Costs and expenses consisted of the following. Cost of goods sold Selling expenses Administrative expenses 1. 2. 3. Break-even point 1. 2. $1,442,560 3. Total $ 475,640 Management is considering the following independent alternatives for 2022. 138,000 $2,056,200 Increase selling price Change compensation Purchase machinery (a) Compute the break-even point in sales dollars for 2021. (Round contribution margin ratio to 4 decimal places eg. 0.2512 and final answer to O decimal places, e.g. 2,510.) Variable Increase unit selling price 25% with no change in costs and expenses. Change the compensation of salespersons from fixed annual salaries totaling $184,000 to total salaries of $36,800 plus a 5% commission on net sales. $966,000 Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50. $ 84,640 (b) Compute the break-even point in sales dollars under each of the alternative courses of action for 2022. (Round contribution margin ratio to 3 decimal places eg. 0.251 and final answers to O decimal places, e.g. 2,510.) $ 53,360 $ $1,104,000 Which course of action do you recommend? Fixed $476,560 391,000 84,640 $952,200 Break-even point
Sheridan Inc. had a bad year in 2021. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 73,600 units of product: net sales $1,840,000; total costs and expenses $2,056,200; and net loss $216,200, Costs and expenses consisted of the following. Cost of goods sold Selling expenses Administrative expenses 1. 2. 3. Break-even point 1. 2. $1,442,560 3. Total $ 475,640 Management is considering the following independent alternatives for 2022. 138,000 $2,056,200 Increase selling price Change compensation Purchase machinery (a) Compute the break-even point in sales dollars for 2021. (Round contribution margin ratio to 4 decimal places eg. 0.2512 and final answer to O decimal places, e.g. 2,510.) Variable Increase unit selling price 25% with no change in costs and expenses. Change the compensation of salespersons from fixed annual salaries totaling $184,000 to total salaries of $36,800 plus a 5% commission on net sales. $966,000 Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50. $ 84,640 (b) Compute the break-even point in sales dollars under each of the alternative courses of action for 2022. (Round contribution margin ratio to 3 decimal places eg. 0.251 and final answers to O decimal places, e.g. 2,510.) $ 53,360 $ $1,104,000 Which course of action do you recommend? Fixed $476,560 391,000 84,640 $952,200 Break-even point
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Question
Transcribed Image Text:Sheridan Inc. had a bad year in 2021. For the first time in its history, it operated at a loss. The company's income statement showed the
following results from selling 73,600 units of product: net sales $1,840,000; total costs and expenses $2,056,200; and net loss
$216,200, Costs and expenses consisted of the following.
Cost of goods sold
Selling expenses
Administrative expenses
1.
2.
3.
Break-even point
1.
2.
$1,442,560
3.
Total
$
475,640
Management is considering the following independent alternatives for 2022.
138,000
$2,056,200
Increase selling price
Change compensation
Purchase machinery
(a) Compute the break-even point in sales dollars for 2021. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and final
answer to O decimal places, e.g. 2,510.)
Variable
Increase unit selling price 25% with no change in costs and expenses.
Change the compensation of salespersons from fixed annual salaries totaling $184,000 to total salaries of $36,800 plus a 5%
commission on net sales.
Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to
50:50.
$
$966,000 $476,560
84,640
(b) Compute the break-even point in sales dollars under each of the alternative courses of action for 2022. (Round contribution margin
ratio to 3 decimal places eg. 0.251 and final answers to 0 decimal places, e.g. 2,510.)
$
53,360
$
Fixed
Which course of action do you recommend?
391,000
84,640
$1,104,000 $952,200
Break-even point
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