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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
P5-3A Tanck Manufacturing’s sales slumped badly in 2011. For the first time in its his- tory, 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.
Â
|
Total |
 |
Variable |
 |
Fixed |
|
|
Cost of goods sold |
$2,100,000 |
 |
$1,440,000 |
 |
$660,000 |
|
Selling expenses |
240,000 |
 |
72,000 |
 |
168,000 |
|
Administrative expenses |
200,000 |
 |
48,000 |
 |
152,000 |
|
 |
$2,540,000 |
 |
$1,560,000 |
 |
$980,000 |
Â
                           Â
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Management is considering the following independent alternatives for  2012.
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 $150,000 to total salaries of $60,000 plus a 5% commission on net sales.
Instructions
(a)Â Â Compute the break-even point in dollars for 2011.
(b)Â Â Compute the break-even point in dollars under each of the alternative courses of action. (Round all ratios to nearest full percent.) Which course of action do you recommend?
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