Fredonia Inc. Breakeven Analysis

Fredonia Inc. had a bad year in 2013. For the
first time in its history, it operated at a loss. The company’s income
statement showed the following results from selling 76,000 units of
product: Net sales $1,459,200; total costs and expenses $1,741,500; and net
loss $282,300. Costs and expenses consisted of the following.

Total
Variable Fixed
COGS 1201800 779500
422300
Selling Expenses 414800 73100 341700
Administration Expenses 124900 53800 71100
Totals 1741500 906400 835100

Management is considering the following
independent alternatives for 2014.

1. Increase
unit selling price 29% with no change in costs and expenses.
2. Change
the compensation of salespersons from fixed annual salaries totaling $195,000
to total salaries of $37,300 plus a 5% commission on net sales.
3. Purchase
new high-tech factory machinery that will change the proportion between
variable and fixed cost of goods sold to 50:50.

Compute the break-even point in dollars for 2014.
(Round contribution margin ratio to 4 decimal
places e.g. 0.2512 and final answers to 0 decimal places, e.g. 2,510.)

Break-even point

$
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2204593

b) Compute the break-even
point in dollars under each of the alternative courses of action. (Round contribution margin ratio to 4 decimal places e.g.
0.2512 and final answers to 0 decimal places, e.g. 2,510.)

Break-even
point

1.

Increase selling price

$
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2.

Change compensation

$
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3.

Purchase machinery

$
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