Your answer is partially correct. Try again Tanek Corp.\'s sales slumped badly i

Question

Your answer is partially correct. Try again Tanek Corp.'s sales slumped badly in 2017. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 590,500 units of product: sales $2,952,500, total costs and expenses $3,070,600, and net loss $118,100. Costs and expenses consisted of the amounts shown below Total Variable Cost of goods sold Selling expenses Administrative expenses $2,527,340 $1,877,790 108,652 80,308 $649,550 186,598 167,702 $3,070,600 $2,066,750 $1,003,850 295,250 248,010 Management is considering the following independent alternatives for 2018 1. Increase unit selling price 20% with no change in costs, expenses, and sales volume 2. Change the compensation of salespersons from fixed annual salaries totaling $177,150 to total salaries of $70,860 plus a 6% commission on sales. (a) Compute the break-even point in dollars for 2017. (Round final answer to O decimal places, e.g. 1,225.) Break-even point 669,233 (b) Compute the contribution margin under each of the alternative courses of action. (Round final answer to o decimal places, e.g. 1,225.) Contribution margin for alternative 1 Contribution margin for alternative 2 41.67 0% 24

Explanation / Answer

590500 Units PU Sales 2952500 5.00 Variable Costs 2066750 3.50 Contribution Margin 885750 1.50 Fixed Costs 1003850 - NOI -118100 - Contribution Margin Ratio 30.00% (Contribution Margin/Sales) (a) BEP in Dollars: Fixed Cost 1003850 A Contribution Margin Ratio 30.00% B BEP in Dollars 3346167 A/B (b) CM Ratio: Alt 1 Alt 2 Alt 1 Alt 2 Sales 6.00 5.00 (5*120%) Same Variable Costs 3.50 3.80 Same 3.50+(5*6%) Contribution Margin 2.50 1.20 Contribution Margin Ratio 41.67% 24.00% (Contribution Margin/Sales) Alt 1 Alt 2 Alt 1 Alt 2 Fixed Cost 1003850 897560 A Same 1003850+70860-177150 Contribution Margin Ratio 41.67% 24.00% B CM Ratio CM Ratio BEP in Dollars 2409240 3739833 A/B Alternative 1 Since it has low BEP

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