Midlands Inc. had a bad year in 2019. For the first time in itshistory, it operated at a loss. The company’s income statementshowed the following results from selling 75,000 units of product:net sales $1,500,000; total costs and expenses $1,620,000; and netloss $120,000. Costs and expenses consisted of the following.
| Total | Variable | Fixed |
| Cost of Goods Sold | $962,000 | $451,000 | $511,000 |
| Selling Expenses | 510,000 | 91,000 | 419,000 |
| Administrative Expenses | 148,000 | 58,000 | 90,000 |
| $1,620,000 | $600,000 | $1,020,000 |
Management is considering the following independent alternativesfor 2020.
1.Increase unit selling price 25% with no change in costs andexpenses.
2.Change the compensation of salespersons from fixed annualsalaries totaling $205,000 to total salaries of $35,025 plus a 5%commission on net sales.
3.Purchase new high-tech factory machinery that will change theproportion between variable and fixed cost of goods sold to50:50.
(a) Compute the break-even point in dollars for2019. (Round contribution margin ratio to 4 decimalplaces e.g. 0.2512 and final answer to 0 decimal places, e.g.2,510.)
(b) Compute the break-even point in dollars undereach of the alternative courses of action for 2020.(Round contribution margin ratio to 3 decimal placese.g. 0.251 and final answers to 0 decimal places, e.g.2,510.)
| Break-even point |
| 1) increase selling price | $ |
| 2) change compensation | $ |
| 3) purchase machinery | $ |
