Chapter 19 Homework x WileyPLUS xCChegg Study | Guided So x New Tab CSecure http
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Chapter 19 Homework x WileyPLUS xCChegg Study | Guided So x New Tab CSecure https//edugen.wileyplus.c uni WileyPLUS Kimmel, Accounting, 6e TER VERSION Chapter 19 Homework Assignment E Exercis 1O- D Exercise 10-2 ?Exercise!9-3 Problem 19-1 Midlands Inc. had a bad year in 2016. 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 $2,340,000; total costs and expenses $1,936,000; and net loss $-404,000. Costs and expenses consisted of the following. Total Variable Fixed $1,260,000 523,000 153,000 $1,936,000 Cost of goods sold Selling expenses $785,000 93,000 S3,000 $936,000 $475,000 430,000 95,000 $1,000,000 Exercse 19-8 Management is considering the following independent altematives for 2017 Objectivse 1. Increase unit selling price 30% with no change in costs and expenses. 2. Change the compensation of salespersons from fixed annual salaries totaling S 199,000 to total salaries of $45,000 plus a 5% commission on net sales. 3. Purchase new high-tach factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50 (a) Compute the break-even point in dollars for 2017. (Round contribution margin ratio to 2 decimal places e.g. o.25 and final answer to O decimal places, e.g. 2,510.) Break-even point (b) Compute th e.g. 2,510.) break-even point in dollars under each of the alternative courses of action. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and final answers to 0 decimal places Break-even point 1. Increase selling price 2. Change compensation 3. Purchase machinery Which course of action do you recommend? LINK TO TEXT Question Attempts: O of S used SAVE FOR LATER BMIT ANSWER 9:38 AM ? ds 1/5/2018 O Type here to searchExplanation / Answer
Break Even Point in Dollars = Fixed Costs/Contribution ratio
Fixed Costs = $1,000,000
Contribution Ratio = (Sales – Variable Cost)/Sales
=(2340,000-936000)/2340,000 = 0.6
Therefore, (a) Break Even Point = 1000,000/0.6 = 1,666,667
(B)
1. Increase Selling price
Current Selling Price = 2340,000/78000 = 30
New Selling Price = 30(1+30%) = 39
Variable cost per unit = 936,000/78000 = 12
New Contribution per Unit = 27
Contribution Ratio = 27/39 = 0.6923
New Break Even point = 1000,000/0.6923 = $1,444,460
2.Change Compensation
New Fixed Cost = 1000,000-199000+45000 = $846,000
New Contribution per Unit = 30 – 12 – 1.5(5% commission on 30)
= 16.5
Contribution Ratio = 16.5/30 = 0.55
Break Even point = 846,000/0.55 = $153,818
3.New Machinery
New Fixed Cost = 1936,000/2 = 968,000
Variable cost per unit = 968,000/78000 = 12.4103
Contribution per unit = 17.5897
Contribution Ratio = 0.5863
Break even point = 968,000/0.5863 = $1,703,326
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