Question
In: Accounting
George Corporation sales slumped badly in 2020. For the first time in its history, it operated...
George Corporation sales slumped badly in 2020. For the first time in its history, it operated at a loss. The company’s income statement showed the following results from selling 555,500 units of product: sales $2,777,500, total costs and expenses $2,869,375, and net loss $91,875. Costs and expenses consisted of the amounts shown below.
Total Variable Fixed
Cost of goods sold $2,358,315 $1,905,365 $452,950
Selling expenses 277,750 102,212 175,538
Administrative expenses 233,310 75,548 157,762
$2,869,375 $2,083,125 $786,250
Management is considering the following independent alternatives
for 2021.
| 1. | Increase unit selling price 25% with no change in costs, expenses, and sales volume. | |
| 2. | Change the compensation of salespersons from fixed annual salaries totaling $166,650 to total salaries of $66,660 plus a 5% commission on sales. |
a) Compute the break-even point in dollars for 2020.
Break-even point $______
b) Compute the contribution margin under each of the alternative courses of action
contribution margin for alternative 1: ____%
contribution margin for alternative 2: ____%
c) Compute the break-even point in dollars under each of the alternative courses of action.
Break-even point for alternative 1: $______
Break-even point for alternative 2: $________
d) Which course of action do you recommend alternative 1 or alternative 2?
Solutions
ekkarill92 answered 1 year agoRelated Solutions
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$ 1,905,365
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Selling expenses
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Cost of goods sold
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93,012
159,738
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68,748
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Fixed
Cost of goods sold
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Selling expenses
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92,092
158,158
Administrative expenses
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68,068
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78,268
163,442
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first time in its history, it operated at a loss. The company’s
income statement showed the following results from selling 550,500
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$560,000
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$70,000
Direct labor
17,500
Variable factory overhead
31,500
Fixed factory overhead
28,000
147,000
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Variable operating expenses
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Fixed operating expenses
3,680
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Direct labor
17,123
Variable factory overhead
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Fixed factory overhead
28,539
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Fixed operating expenses
4,854
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absorption costing income statement is
a.$395,275
b.$400,129
c.$372,357
d.$498,068
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