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wings from sing Total , 500 Piros Corps sales slumped badly in 2020. For the first time s erv erted The content whowed the 1
Computer the break even pumn TITUUTTATS TOT ZUZU Break-even point Compute the contribution margin under each of the alternati
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Answer #1

1. Breakeven point in dollars = Fixed cost/ CM Ratio

=843,625/25%

=$ 3,374,500

Cm ratio= ( Sales - variable)/Sales

= ( 2,977,500- 2,233,125)/2,977,500

= 25%

2. Contribution margin for alternative 1

Sales price before increase = $ 2,977,500/595,500 units

= $ 5 per unit

Sales price after increase= 5× 125% = 6.25 per unit

Total sales = 6.25 per unit × 595,500 units

= $ 3,721,875

CM ratio= (3,721,875- 2,233,125)/3,721,875

= 40%

Contribution margin for alternative 2

Total variable Expenses

Cost of goods sold = 2,042,565

Selling expenses= 109,572+ 5% on 2,977,500= 2,58,447

Administrative expenses= 80,988

Total variable cost= 2,382,000

CM ratio=( 2,977,500-2,382,000)/2,977,500

= 20%

Breakeven point in dollars

Alternative 1 = fixed cost/ Cm ratio

= 843,625/40%

= $ 2,109,062.50

Alternative 2 = fixed cost/ CM ratio

Fixed cost = cost of goods sold = 486,325

Selling expenses= (188,178-178,650)+71,460= 80,988

Administrative expenses= 169,122

Total fixed cost= 736,435

Breakeven point= 736,435/20%

= 3,682,175

We recommend course of action 1 beacuse it's breakeven point is low and profit genrating on the other hand alternative 2 is increasing loss and breakeven point is high Due to lower contribution margin.

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