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Tanek Corp's sales slumped badly in 2017. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 585,500 units of product: sales $2,927,500, total costs and expenses $3,036,840, and net loss $109,340. Costs and expenses consisted of the amounts shown below. Cost of goods sold Selling expenses Administrative expenses 1. 2. Total $2,498,180 292,750 245,910 $3,036,840 $2,107,800 Break-even point $ Management is considering the following independent alternatives for 2018. Contribution margin for alternative 1 Increase unit selling price 20% with no change in costs, expenses, and sales volume. Change the compensation of salespersons from fixed annual salaries totaling $175,650 to total salaries of $70,260 plus a 4% commission on sales. Contribution margin for alternative 2 Variable (a) Compute the break-even point in dollars for 2017. (Round final answer to 0 decimal places, e.g. 1,225.) Contribution margin for alternative 1 Fixed (b) Compute the contribution margin under each of the alternative courses of action. (Round final answers to O decimal places, e.g. 1,225.) Contribution margin for alternative 2 $1,920,440 $577,740 107,732 79,628 185,018 Break-even point for alternative 1 $ 166,282 $929,040 Break-even point for alternative 2 $ (b) Compute the contribution margin under each of the alternative courses of action. (Round final answers to O decimal places, e.g. 1.225.) Which course of action do you recommend? % Compute the break-even point in dollars under each of the alternative courses of action. (Round selling price per unit to 2 decimal places, e.g. 5.25 and other calculations to O decimal places, e.g. 20% and also final answers to O decimal places, e.g. 1,225.) % %

Tanek Corp's sales slumped badly in 2017. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 585,500 units of product: sales $2,927,500, total costs and expenses $3,036,840, and net loss $109,340. Costs and expenses consisted of the amounts shown below. Cost of goods sold Selling expenses Administrative expenses 1. 2. Total $2,498,180 292,750 245,910 $3,036,840 $2,107,800 Break-even point $ Management is considering the following independent alternatives for 2018. Contribution margin for alternative 1 Increase unit selling price 20% with no change in costs, expenses, and sales volume. Change the compensation of salespersons from fixed annual salaries totaling $175,650 to total salaries of $70,260 plus a 4% commission on sales. Contribution margin for alternative 2 Variable (a) Compute the break-even point in dollars for 2017. (Round final answer to 0 decimal places, e.g. 1,225.) Contribution margin for alternative 1 Fixed (b) Compute the contribution margin under each of the alternative courses of action. (Round final answers to O decimal places, e.g. 1,225.) Contribution margin for alternative 2 $1,920,440 $577,740 107,732 79,628 185,018 Break-even point for alternative 1 $ 166,282 $929,040 Break-even point for alternative 2 $ (b) Compute the contribution margin under each of the alternative courses of action. (Round final answers to O decimal places, e.g. 1.225.) Which course of action do you recommend? % Compute the break-even point in dollars under each of the alternative courses of action. (Round selling price per unit to 2 decimal places, e.g. 5.25 and other calculations to O decimal places, e.g. 20% and also final answers to O decimal places, e.g. 1,225.) % %

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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Tanek Corp's sales slumped badly in 2017. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 585,500 units of product: sales $2,927,500, total costs and expenses $3,036,840, and net loss $109,340. Costs and expenses consisted of the amounts shown below. Cost of goods sold Selling expenses Administrative expenses 2. Total $2,498,180 Break-even point $ 292,750 245,910 $3,036,840 Contribution margin for alternative 1 Contribution margin for alternative 2 Management is considering the following independent alternatives for 2018. Contribution margin for alternative 1 1. Increase unit selling price 20% with no change in costs, expenses, and sales volume. Change the compensation of salespersons from fixed annual salaries totaling $175,650 to total salaries of $70,260 plus a 4% commission on sales. Contribution margin for alternative 2 Break-even point for alternative 1 Variable $1,920,440 eTextbook and Media 107,732 (a) Compute the break-even point in dollars for 2017. (Round final answer to O decimal places, e.g. 1,225.) 79,628 $2,107,800 (b) Compute the contribution margin under each of the alternative courses of action. (Round final answers to O decimal places, e.g. 1,225.) $ Break-even point for alternative 2 $ Fixed Which course of action do you recommend? $577,740 185,018 166,282 $929,040 (b) Compute the contribution margin under each of the alternative courses of action. (Round final answers to O decimal places, e.g. 1,225.) % Compute the break-even point in dollars under each of the alternative courses of action. (Round selling price per unit to 2 decimal places, e.g. 5.25 and other calculations to O decimal places, e.g. 20% and also final answers to O decimal places, e.g. 1,225.) % % %
Transcribed Image Text:Tanek Corp's sales slumped badly in 2017. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 585,500 units of product: sales $2,927,500, total costs and expenses $3,036,840, and net loss $109,340. Costs and expenses consisted of the amounts shown below. Cost of goods sold Selling expenses Administrative expenses 2. Total $2,498,180 Break-even point $ 292,750 245,910 $3,036,840 Contribution margin for alternative 1 Contribution margin for alternative 2 Management is considering the following independent alternatives for 2018. Contribution margin for alternative 1 1. Increase unit selling price 20% with no change in costs, expenses, and sales volume. Change the compensation of salespersons from fixed annual salaries totaling $175,650 to total salaries of $70,260 plus a 4% commission on sales. Contribution margin for alternative 2 Break-even point for alternative 1 Variable $1,920,440 eTextbook and Media 107,732 (a) Compute the break-even point in dollars for 2017. (Round final answer to O decimal places, e.g. 1,225.) 79,628 $2,107,800 (b) Compute the contribution margin under each of the alternative courses of action. (Round final answers to O decimal places, e.g. 1,225.) $ Break-even point for alternative 2 $ Fixed Which course of action do you recommend? $577,740 185,018 166,282 $929,040 (b) Compute the contribution margin under each of the alternative courses of action. (Round final answers to O decimal places, e.g. 1,225.) % Compute the break-even point in dollars under each of the alternative courses of action. (Round selling price per unit to 2 decimal places, e.g. 5.25 and other calculations to O decimal places, e.g. 20% and also final answers to O decimal places, e.g. 1,225.) % % %
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