Question

Blossom Corp.’s 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 500,500 units of product: sales $2,502,500, total costs and expenses $2,615,550, and net loss $113,050. Costs and expenses consisted of the amounts shown below.

		Total		Variable		Fixed
Cost of goods sold		$2,155,090		$1,491,490		$663,600
Selling expenses		250,250		92,092		158,158
Administrative expenses		210,210		68,068		142,142
		$2,615,550		$1,651,650		$963,900

Management is considering the following independent alternatives for 2021.

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 $150,150 to total salaries of $60,060 plus a 6% commission on sales.

	Your answer is correct.

Compute the break-even point in dollars for 2020.

Break-even point

$

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	Your answer is partially correct. Try again.

Compute the contribution margin under each of the alternative courses of action.

Contribution margin for alternative 1		%
Contribution margin for alternative 2		%

Compute the break-even point in dollars using the contribution margin ratio under each of the alternative courses of action.

Break-even point for alternative 1		$
Break-even point for alternative 2		$

Answer 1