Gorham Manufacturing\'s sales slumped badly in 2012. For the first time in its h

Question

Gorham Manufacturing's sales slumped badly in 2012. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 600,000 units of product: Net sales $2,400,000; total costs and expenses $2,540,000; and net loss $140,000. Costs and expenses consisted of the amounts shown below.
Total Variable Fixed
Cost of goods sold $2,100,000 $1,440,000 $660,000
Selling expenses 240,000 72,000 1 68,000
Administrative expenses 200,000 48,000 152,000
$2,540,000 $1,560,000 $980,000

break even point 2800000
Compute the break-even point in dollars under each of the alternative courses of action.
2. Change the compensation of salespersons from fixed annual salaries totaling $150,000 to total salaries of $60,000 plus a 3% commission on net sales.
3. Purchase new automated equipment that will change the proportion between variable and fixed cost of goods sold to 54% variable and 46% fixed.

Explanation / Answer

1 - Add 20% of 2.4 mil = 480,000 #2 - From 150,000 to 60,000 + 72,000 (3% of 2,400,000), or 150,000 to 132,000 #3 - Total VC and FC in CGS - 2,100,000. Revised VC = 54%, or 1,134,000, and FC = 966,000 Change - VC (306,000) FC 306,000 these are the corect ans i got

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