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Sunland Inc. 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 77,000 units of product: net sales $1,540,000; total costs and expenses $1,939,000; and net loss $399,000. Costs and expenses consisted of the following. Cost of goods sold Selling expenses Administrative expenses Total Increa $1,278,800 511,200 149,000 $1,939,000 Variable $778,000 90,000 56,000 Fixed $500,800 421,200 93,000 $924,000 $1,015,000 Management is considering the following independent alternatives for 2020. ing price 20% with no change in costs and expenses.

Sunland Inc. 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 77,000 units of product: net sales $1,540,000; total costs and expenses $1,939,000; and net loss $399,000. Costs and expenses consisted of the following. Cost of goods sold Selling expenses Administrative expenses Total Increa $1,278,800 511,200 149,000 $1,939,000 Variable $778,000 90,000 56,000 Fixed $500,800 421,200 93,000 $924,000 $1,015,000 Management is considering the following independent alternatives for 2020. ing price 20% with no change in costs and expenses.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Sunland Inc. 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 77,000 units of product: net sales $1,540,000; total costs and expenses $1,939,000; and net loss $399,000. Costs and expenses consisted of the following. Cost of goods sold Selling expenses Administrative expenses Total Variable Fixed $1,278,800 $778,000 511,200 90,000 $500,800 56,000 421,200 149,000 93,000 $1,939,000 $924,000 $1,015.000 Management is considering the following independent alternatives for 2020. 1. Increase unit selling price 20% with no change in costs and expenses.
Transcribed Image Text:Sunland Inc. 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 77,000 units of product: net sales $1,540,000; total costs and expenses $1,939,000; and net loss $399,000. Costs and expenses consisted of the following. Cost of goods sold Selling expenses Administrative expenses Total Variable Fixed $1,278,800 $778,000 511,200 90,000 $500,800 56,000 421,200 149,000 93,000 $1,939,000 $924,000 $1,015.000 Management is considering the following independent alternatives for 2020. 1. Increase unit selling price 20% with no change in costs and expenses.
1. Management is considering the following independent alternatives for 2020. 2. 3. Break-even point (a) Compute the break-even point in dollars for 2019. (Round contributiog margin ratio to 4 decimal places eg. 0.2512 and final answer to O decimal places, eg. 2,510) Break-even point 1. Increase unit selling price 20% with no change in costs and expenses. Change the compensation of salespersons from fixed annual salaries totaling $198,000 to total salaries of $45,015 plus a 5% commission on net sales. 2. Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50. 3. $1,939,000 $924,000 $ (b) Compute the break-even point in dollars under each of the alternative courses of action for 2020. (Round contribution margin ratio to 3 decimal places eg. 0.251 and final answers to 0 decimal places, e.g. 2,510) Increase selling price Change compensation Purchase machinery $1,015.000 Break-even point S $ Which course of action do you recommend? Alternative 11
Transcribed Image Text:1. Management is considering the following independent alternatives for 2020. 2. 3. Break-even point (a) Compute the break-even point in dollars for 2019. (Round contributiog margin ratio to 4 decimal places eg. 0.2512 and final answer to O decimal places, eg. 2,510) Break-even point 1. Increase unit selling price 20% with no change in costs and expenses. Change the compensation of salespersons from fixed annual salaries totaling $198,000 to total salaries of $45,015 plus a 5% commission on net sales. 2. Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50. 3. $1,939,000 $924,000 $ (b) Compute the break-even point in dollars under each of the alternative courses of action for 2020. (Round contribution margin ratio to 3 decimal places eg. 0.251 and final answers to 0 decimal places, e.g. 2,510) Increase selling price Change compensation Purchase machinery $1,015.000 Break-even point S $ Which course of action do you recommend? Alternative 11
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