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##### Fredonia Inc. Breakeven Analysis

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Question;Fredonia Inc. had a bad year in 2013. For the first time in its history, it operated at a loss....Fredonia Inc. had a bad year in 2013. For the first time in its history, it operated at a loss. The company?s income statement showed the following results from selling 78,000 units of product: Net sales \$1,536,600, total costs and expenses \$1,740,200, and net loss \$203,600. Costs and expenses consisted of the following.TotalVariableFixedCost of goods sold\$1,202,800\$780,600\$422,200Selling expenses423,50078,900344,600Administrative expenses113,90052,70061,200\$1,740,200\$912,200\$828,000Management is considering the following independent alternatives for 2014.1.Increase unit selling price 29% with no change in costs and expenses.2.Change the compensation of salespersons from fixed annual salaries totaling \$203,800 to total salaries of \$43,200 plus a 5% 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.(a) Compute the break-even point in dollars for 2014. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and final answers to 0 decimal places, e.g. 2,510.)Break-even point\$2038950(b) Compute the break-even point in dollars under each of the alternative courses of action. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and final answers to 0 decimal places, e.g. 2,510.)Break-even point1.Increase selling price\$26299352.Change compensation\$3.Purchase machinery\$

Paper#37271 | Written in 18-Jul-2015

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