mmel, Survey of Accounting, 1e ACC IN ORG& SOCIETY (ACC2301) ractice Gradebook O
ID: 2517876 • Letter: M
Question
mmel, Survey of Accounting, 1e ACC IN ORG& SOCIETY (ACC2301) ractice Gradebook ORION Downlcadable eTextbook ignment FULL SCREEN Probiem 11-3 ES Marigold 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 $3,044,600, and net loss $117,100. Costs and expenses consisted of the amounts shown below Total Va riable Fixed Cost of goods sold Selling expenses Administrative expenses $2,505,940 $1,861,890 $644,050 292,750 0,2 185,018 79,628 166,282 245,910 $3.044,600 2,049,250 $993,350 udy Management is considering the following independent alternatives for 2018. 1. Increase unit selling price 24% 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 pla a 6% commisson en siles (a) Compute the break-even point in dollars for 2017. (Round final answer to o decimal places . ,225.) Break-even point (b) Compute the break-even point in dollars under each of the alternative courses of action. (Round selling price per unit to 2 decímal places o.g. 5.25 and ather calculations to 0 decimal places, e.g. 20% and also final answer to O decimal places, eg. 1.25) Break-even point for alternative 1 s Break-even point for alternative 2 Which course of action do you recommend?Explanation / Answer
Statement showing variable cost per units
A
B
C
D=B/585500
Total
Variable
Fixed
variable cost per unit
Cost of goods sold
2505940
1861890
644050
3.18
Selling expenses
292750
107732
185018
0.184
Administrative expenses
245910
79628
166282
0.136
3044600
2049250
995350
3.5
(a)
Statement showing break-even point in dollars
A
Sales price per unit
5
B
variable cost per unit
3.5
C
Contribution per unit =A-B
1.5
D
Fixed cost
995350
E
Break-even point= D/C
663566.7
F
Round off of breakeven point
663567
G
Break-even point in dollars=F*A
3317835
(b)
Alternative 1
Increase in sales price by 24%.
Statement showing break-even point for alternative 1
A
Old selling price
5
B
Increase in selling price= 5*24%
1.2
C
New selling price =A+B
6.2
D
Variable cost per unit
3.5
E
Contribution per unit = C-D
2.7
F
Fixed cost
995350
G
Break-even point in units=F/E
368648.1
H
Round off breakeven point units
368649
I
Break-even point in dollars=H*C
2285624
Alternative 2
Statement showing break-even point for alternative 2
A
Sales person fixed annual salary
175650
B
Revised fixed annual salary
70260
C
Reduction in fixed cost A-B
105390
D
Total fixed cost
995350
E
Revised total fixed cost D-C
889960
F
Selling price
5
G
Commission on sales @6%=F*6%
0.3
H
Variable cost per unit
3.5
I
Revised variable cost per unit=H+G
3.8
J
Revised contribution per unit=F-I
1.2
K
Break-even point in units=E/J
741633.3
L
Roundoff break even point in units
741634
M
Break-even point in dollars=L*F
3708170
Alternative 1 is better option as it has low breakeven point.
selling units (A) 585500 Sales in $ (B) 2927500 Sellilng price per unit=B/A 5Related Questions
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