Cost -Volume Profit

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Go to the P22-3A problem in your text. See the “Do it” example for information on break even analysis (also found in the Digital Book under Course Resources).

Compute the breakeven point for fiscal year 2017.

Compute the breakeven point in dollars under each of the alternative courses of action.

What course of action do you recommend and why?

Respond to the Discussion per your Syllabus guidelines.

Reference

Weygandt, J., Kimmel, P. & Kieso, D. (2015). Accounting principles (12th ed.). Hoboken, NJ: John Wiley & Sons, Inc.

Here’s P22 -3A Below

Tanne’k 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 500,000 units of product: sales $2,500,000 total cost and expenses $2,600,000, and net loss of $100,000. Cost and expenses consisted of the amounts shown below.

Total Variable Fixed

Cost of good sold $2,140,000 $1,590,000 $550,000

Selling expenses $250,000 $92,000 $158,000

Administrative $210,000 $68,000 $142,000

___________ _________ __________

$2,600,000 $1,750,000 $850,000

Management is considering the following independent alternatives for 2018.

  1. Increase unit selling price 20% with no change in costs, expenses an sales volume.
  2. Change the compensation of sales persons from fixed annual salaries totaling $150,000 to total salaries of $60,000 plus a 5% commission on sales.

Instruction:

  1. Compute the break -even point in dollars for2017.
  2. Compute the break – even point in dollars under each of the alternative course of action. (Round all ratios to nearest full present.) Which course of action do you recommend?
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