Tane Corp. s sales slumped badly in 2017. For he fr t consisted of the emounts s

Question

Tane Corp. s sales slumped badly in 2017. For he fr t consisted of the emounts shawn belo. me n ts h ter it operated at a lass. e oompany's ncome state ent sh the folla n results fram selling 555 son units o rodut: sales $2 777 500 t tal c sts and exper ses $2.888 60 and net 1 111 100 Co ts and e penses Total Variable Fixed Cost of goods sold Selling experses Acministrative $2 377,540 $1,765,490 $511,050 102,212 175,535 157,762 $2,988,E00 1,944,250 944,350 33,310 Mansgement is considering the followirg independent alterratives for 2015 l. Increase unit seling pnce 25% with no change in costs, expenses, and sales voume. 2. Charge the compensaton cf selespersons from fixed annual salaries totaling S 100,550 to total salaries of S“,600 plus·0% commission on sales. Compute the break-even point in dellars for 2017, (Round final ansvwer to 0 decimal places, e.g. 1,225) Break-even point (b) Compute the contribution margin under each of the ?ternative course"fection. (Round finafanswer to 0 decimal places, eg, 1,225.) Contribution Contibution margin for altemative 2 ion margn for altemative 1 places, eg, 20% places, e-g. 1, Compute the break even point n dollars under each of the alternat Break-even point for altemative 1 Break-even point for sltemative 2 courses ot act on Round selling price per arnit to 2 decis al places, e. 5.25 and other calc lations to 0 decimal ?1aces e g 2006 and ako final answer to O deci al places, e 1 225

Explanation / Answer

1. Break Even Point = Fixed Costs / Contribution Margin Ratio

Break Even Point = $944350 / ($2777500 - 1944250) / $2777500

Break Even Point = $944350 / $833250 * $2777500

Break Even Point = $3147833

2. Contributuion Margin

Alternative 1:
Contribution Margin Ratio = (Sales - Variable cost) / Sales

Contribution Margin Ratio = ($2777500*1.25 - $1944250) / $2777500*1.25

Contribution Margin Ratio = ($3471875 - $1944250) / $3471875

Contribution Margin Ratio = 44%

Alternative 2:
Contribution Margin Ratio = (Sales - Variable cost) / Sales

Contribution Margin Ratio = ($2777500 - $1944250 - $2777500*0.06) / $2777500

Contribution Margin Ratio = ($2777500 - $1944250 - $166650) / $2777500

Contribution Margin Ratio = 24%

Break Even Point

Alternative 1:

Break Even Point = Fixed Costs / Contribution Margin Ratio

Break Even Point = $944350 / 44%

Break Even Point = $2146250

Alternative 2:

Break Even Point = Fixed Costs / Contribution Margin Ratio

Break Even Point = ($944350 - $99990) / 24%

Break Even Point = $3518166.67

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