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Chapter 6 Problem -15 points Johnston, Inc. had a bad year in 2014. For the first time in its history.it operated at a loss. The companys income statement showed the following results. Number of units sold Net Sales 2.000.000 Total costs and expenses 2.135.000 Net Loss (135.000) Costs and expenses consisted of the following: Total Variable Fixed Costs and expenses consisted of the following: Cost of goods sold S950.000 S518,000 $517,000 S92,000 Selling expenses $425,000 Administrative expenses S150,0000 S5N.000 $92,000 S2,135.000 si 100.000 $1.035.000 Management is considering the following INDEPENDENT alternatives for 2015. l. Increase unit selling price 25% with no change in costs and expenses. 2. Change the compensation of salespersons form fixed annual salaries totaling S250.000 to total salaries of S60.000 plus a 5% commission on net sales. Purchase new high-tech factory machinery that will change the proportion between variable and fived cost ofgoods sold to 50:50 Required a) Compute the break-even point in dollars for 2015 b) Compute the break-even point in dollars under each of the alternative courses of action. Which scenario de yeu recommend? NOTE: Each scenario is independent of any other scenario Unit selling price Increase selling price Scenario b)I Scenario b)2 commission on sales Scenario b02 Reduction in salaries 2015 2015 b) 1 by 2 Sales Variable expenses Contribution margin Contribution margin ratio Fixed Expenses Break-even point in dollars 2014 Total units sold 2014 sales 2014 unit selling price 2015 Total units sold 2015 sales 2015 unit selling price b)3
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