Question

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 550,500 units of product: sales $2,752,500, total costs and expenses $2,862,600, and net loss $110,100. Costs and expenses consisted of the amounts shown below. Total Variable Fixed Cost of goods sold $2,356,140 $1,750,590 $605,550 Selling expenses 275,250 101,292 173,958 Administrative expenses 231,210 74,868 156,342 $2,862,600 $1,926,750 $935,850 Management is considering the following independent alternatives for 2018. 1. Increase unit selling price 21% with no change in costs, expenses, and sales volume. 2. Change the compensation of salespersons from fixed annual salaries totaling $165,150 to total salaries of $66,060 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 $ Which course of action do you recommend? Link to Text Question Attempts: Unlimited Save for later Submit Answer

Answer 1

D) Recommended Alternative 1
Because In Alternative 1 Break Even point in dollars are comparatively less as compared to Alternative 2