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Fredonia Inc. Breakeven Analysis




Question;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 76,000 units of;product: Net sales $1,459,200, total costs and expenses $1,741,500, and net;loss $282,300. Costs and expenses consisted of the following.;Total;Variable Fixed;COGS 1201800 779500;422300;Selling Expenses 414800 73100 341700;Administration Expenses 124900 53800 71100;Totals 1741500 906400 835100;Management 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 $195,000;to total salaries of $37,300 plus a 5% commission on net sales.;3. Purchase;new high-tech factory machinery that will change the proportion between;variable and fixed cost of goods sold to 50:50.;Compute the break-even point in dollars for 2014.;(Round contribution margin ratio to 4 decimal;places e.g. 0.2512 and final answers to 0 decimal places, e.g. 2,510.);Break-even point;$;2204593;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;point;1.;Increase selling price;$;2.;Change compensation;$;3.;Purchase machinery;$


Paper#37332 | Written in 18-Jul-2015

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