Question

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Midlands Inc. had a bad year in 2019. For the first time in its history, it operated at a low. The company's income statement showed the following results from selling 75.000 units of product $1.500.000 total costs and expenses $1.900.000 and n ow $400000. Costs de pesos of the following sales Total Variable Fixed Cost of goods sold Selling expenses $1.240,000 515.000 145,000 $1.900.000 $755,000 $485.000 90.000 425.000 55.000 90.000 $900,000 $1,000,000 Administrative expenses Management is considering the following independent alternatives for 2020 1. Increase unit selling price 20% with no change in costs and expenses 2. Change the compensation of salespersons from fed armasalarles totaling $195.000 to total salaries of $35.000 plus commission on net sales 3. Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50. al Compute the break even point in dollars for 2019. u t on martie de 0.512 and to di e 2.510) Break even points 0.51 native course of action for 2020. dotto Il Compute the break even point in dollars under each of the 2.510) Break even point 1. Increase selling price s 2. Change compensations 3. Purchase machinery s

Answer 1

Answers A) Break Even Point in Dollars 2500000 B) 1) increasing Selling Price 2) Change Compensation 3) Purchase Machinery 2000000 2400000 2316327 Whichcourse of Action Do you recommend Increasing Selling Price, alternative 1

Data total Variable Fixed Cost of goods Sold Selling Expenses Administrative Expenses total Sales Revneue Less:Varaible Cost Contribution Margin Less: Fixed Cost Net Loss 1240000 755000 485000 515000 425000 90000 145000 55000 90000 1000000 1900000 900000 1500000 900000 600000 1000000 -400000 Break Even Dollars = Fixed Cost / CM Ratio CM Ratio Contribution Margin /Sales CM Ratio 600000/1500000 40% Break Even Dollars -1000000/40% 2500000

IF Units Selling Price is Increased by20% Sales Revneue = (1500000*1.2)) Less:Varaible Cost Contribution Margin 1800000 900000 900000 50.00% CM Ratio 900000/1800000 Break Even Dollars 1000000/50% 2000000 Compensations to Sales Persona from Fixed Annula Salaries to 35,000 Plus 5% Common on net Sales Total Variable Fixed Reveised cost Data Cost of goods Sold Selling Expenses Administrative Expenses total Sales Revneue Less: Varaible Cost Contribution Margin 1240000 485000 755000 430000 165000 265000 145000 55000 90000 840000 1500000 1815000 975000 975000 525000 35.00% 2400000 CM Ratio -525000/1500000 Break Even Dollars -840000/35%

Change the Proportion of Cost of good sold of Variable and Fixed into 50:50 Reveised cost Data Total Variable Fixed Cost of goods Sold Selling Expenses Administrative Expenses total 620000 1240000 620000 425000 515000 90000 90000 145000 55000 765000 1900000 1135000 Sales Revenue 1500000 Less:Varaible Cost Contribution Margin 765000 735000 CM Ratio 735000/1500000 49.00% Break Even Dollars =1135000/49% 2316327