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##### first time in its history it operated at a loss

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solution

**Question**

Cruz Manufacturing had a bad year in 2008. For the first time in its history it operated at a loss. The company's income statement showed the following results from selling 80,000 units of product: Net sales $1,600,000, total costs and expenses $1,740,000, and net loss $140,000. Costs and expenses consisted of the following.;Total;Variable;Fixed;Cost of goods sold $1,200,000 $780,000 $420,000;Selling expenses 420,000 75,000 345,000;Administrative expenses 120,000;45,000;75,000;$1,740,000;$900,000;$840,000;Management is considering the following independent alternatives for 2009.;Increase unit selling price 25% with no change in costs and expenses.;Change the compensation of salespersons from fixed annual salaries totaling $200,000 to total salaries of $40,000 plus a 5% commission on net sales.;Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50.;Compute the break-even point in dollars for 2008. (Round answers to 0 decimal places, e.g. 125. For computational of unit costs and contribution margin ratios, round to 4 decimal places, e.g. 10.2520. Round all other computations to 0 decimal places, e.g. 125.);$;Compute the break-even point in dollars under each of the alternative courses of action. (Round answers to 0 decimal places, e.g. 125. For computational of unit costs and contribution margin ratios, round to 4 decimal places, e.g. 10.2520. Round all other computations to 0 decimal places, e.g. 125.);1. Increase selling price $;2. Change compensation $;3. Purchase machinery $;Which alternative is the recommended course of action?;213

Paper#25420 | Written in 18-Jul-2015

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