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Home / Questions / A Fredonia Inc. had a bad year in 2013. For the first time in its history, it operated a l

A Fredonia Inc. had a bad year in 2013. For the first time in its history, it operated a l

A Fredonia Inc. had a bad year in 2013. For the first time in its history, it operated a loss. The company's income statement showed the following results from selling 80,00 units of product: net sales $2,000,000; total costs and expenses $1,740,000; and net loss $135,000. Costs and expenses consisted of the following. Total Variable Fixed Cost of goods sold Selling expenses Administrative expenses $1,468,000 950,000518,000 517,000 92,000 58,000 425,000 150,000 92,000 $2,135,000$1,100,000 $1,035,000 Management is considering the following independent alternatives for 2014 1 . Increase unit selling price 25% with no change in costs and expenses. 2. Change the compensation of salespersons from fixed annual salaries totaling $200,0 to total salaries of $40,000 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. Instructions (a) Compute the break-even point in dollars for 2014 (b) Compute the break-even point in dollars under each of the alternative courses of action. (Round to the nearest dollar.) Which course of action do you recommend?

Dec 06 2019 View more View Less

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