I have been working on this a while. If you could help me. Thanks Problem 22-3A

Question

I have been working on this a while. If you could help me. Thanks

Problem 22-3A 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 585,500 units of product: sales $2,927,500, total costs and expenses $3,044,600, and net loss $117,100. Costs and expenses consisted of the amounts shown below. Total

Variable Fixed Cost of goods sold $2,505,940 $1,861,890 $644,050

Selling expenses 292,750 107,732 185,018

Administrative expenses 245,910 79,628 166,282 $3,044,600 $2,049,250 $995,350

Management is considering the following independent alternatives for 2018.

1. Increase unit selling price 23% with no change in costs, expenses, and sales volume. 2. Change the compensation of salespersons from fixed annual salaries totaling $175,650 to total salaries of $70,260 plus a 5% commission on sales.

(a) Compute the break-even point in dollars for 2017. (Round final answer to 0 decimal places, e.g. 1,225.) Break-even point $

(b) Compute the contribution margin under each of the alternative courses of action. (Round final answer to 0 decimal places, e.g. 1,225.)

Contribution margin for alternative 1 %

Contribution margin for alternative 2 % Compute the break-even point in dollars under each of the alternative courses of action. (Round selling price per unit to 2 decimal places, e.g. 5.25 and other calculations to 0 decimal places, e.g. 20% and also final answer to 0 decimal places, e.g. 1,225.)

Break-even point for alternative 1 $

Break-even point for alternative 2 $

Explanation / Answer

a Tanek Corp Details Total   Variable   Fixed Units Sold         585,500 Sales Revnue     2,927,500     2,927,500 Cost of Goods Sold     2,505,940     1,861,890      644,050 Selling Expenses         292,750        107,732      185,018 Admin Expenses         245,910           79,628      166,282 Total Expenses     3,044,600     2,049,250      995,350 Contribution Margin =Sales-Variable costs         878,250 Contribution Margin Ratio= Contribution Margin/Sales= 30.00% Total Fixed Cost         995,350 Net Operating Expense/(loss)       (117,100) BEP $ Sales =Fixed Cost/CM Ratio=     3,317,833 So BEP $ Sales =$3,317,833 b Option 1 Details Total   Variable   Fixed Units Sold         585,500 Sales Revnue     3,600,825     3,600,825 Cost of Goods Sold     2,505,940     1,861,890      644,050 Selling Expenses         292,750        107,732      185,018 Admin Expenses         245,910           79,628      166,282 Total Expenses     3,044,600     2,049,250      995,350 Contribution Margin =Sales-Variable costs     1,551,575 Contribution Margin Ratio= Contribution Margin/Sales= 43.09% Total Fixed Cost         995,350 BEP $ Sales =Fixed Cost/CM Ratio=     2,309,963 Option 2 Details Total   Variable   Fixed Units Sold         585,500 Sales Revnue     2,927,500     2,927,500 Cost of Goods Sold     2,505,940     1,861,890      644,050 Selling Expenses         292,750        254,107         79,628 Admin Expenses         245,910           79,628      166,282 Total Expenses     3,044,600     2,195,625      889,960 Contribution Margin =Sales-Variable costs         731,875 Contribution Margin Ratio= Contribution Margin/Sales= 25.00% Total Fixed Cost         889,960 BEP $ Sales =Fixed Cost/CM Ratio=     3,559,840

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