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Swifty 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 78,000 units of product: net sales $1,560,000; total costs and expenses $1,795,200; and net loss $235,200. Costs and expenses consisted of the following. Cost of goods sold Selling expenses Administrative expenses Total $1,115,600 526,600 153.000 Variable $628,000 94,000 58.000 Fixed $487,600 432,600 95.000

Swifty 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 78,000 units of product: net sales $1,560,000; total costs and expenses $1,795,200; and net loss $235,200. Costs and expenses consisted of the following. Cost of goods sold Selling expenses Administrative expenses Total $1,115,600 526,600 153.000 Variable $628,000 94,000 58.000 Fixed $487,600 432,600 95.000

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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Swifty 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 78,000 units of product: net sales $1,560,000; total costs and expenses $1,795,200; and net loss $235,200. Costs and expenses consisted of the following. Cost of goods sold Selling expenses Administrative expenses 1. 2. 3. 1. Break-even point 2. 3. Total $1,115,600 526,600 $ 153,000 $1,795,200 Management is considering the following independent alternatives for 2020. Increase selling price Purchase machinery Variable $628,000 Increase unit selling price 25% with no change in costs and expe ses. (a) Compute the break-even point in dollars for 2019. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and final answer to O decimal places, e.g. 2,510.) 94,000 Change the compensation of salespersons from fixed annual salaries totaling $202,000 to total salaries of $40,000 plus a 5% commission on net sales. $ Change compensation $ 58,000 Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50. $ Fixed (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 e.g. 0.251 and final answers to O decimal places, e.g. 2,510.) $487,600 2030400 Which course of action do you recommend? 432,600 $780,000 $1,015,200 Break-even point 95,000
Transcribed Image Text:Swifty 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 78,000 units of product: net sales $1,560,000; total costs and expenses $1,795,200; and net loss $235,200. Costs and expenses consisted of the following. Cost of goods sold Selling expenses Administrative expenses 1. 2. 3. 1. Break-even point 2. 3. Total $1,115,600 526,600 $ 153,000 $1,795,200 Management is considering the following independent alternatives for 2020. Increase selling price Purchase machinery Variable $628,000 Increase unit selling price 25% with no change in costs and expe ses. (a) Compute the break-even point in dollars for 2019. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and final answer to O decimal places, e.g. 2,510.) 94,000 Change the compensation of salespersons from fixed annual salaries totaling $202,000 to total salaries of $40,000 plus a 5% commission on net sales. $ Change compensation $ 58,000 Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50. $ Fixed (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 e.g. 0.251 and final answers to O decimal places, e.g. 2,510.) $487,600 2030400 Which course of action do you recommend? 432,600 $780,000 $1,015,200 Break-even point 95,000
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