Ivanhoe Inc. had a bad year in 2021. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 86,400 units of product: net sales $2,160,000; total costs and expenses $2,413,800; and net loss $253,800. Costs and expenses consisted of the following. Cost of goods sold Selling expenses Administrative expenses 1. 2. 3. Management is considering the following independent alternatives for 2022. Break-even point $ 1. Variable $1,134,000 99,360 62,640 $2,413,800 $1,296,000 Total $1,693,440 558,360 Increase selling price 162,000 2. Change compensation Increase unit selling price 25% with no change in costs and expenses. Change the compensation of salespersons from fixed annual salaries totaling $216,000 to total salaries of $43,200 plus a 5% commission on net sales. 3. Purchase machinery Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50. (a) Compute the break-even point in sales dollars for 2021. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and final answer to 0 decimal places, e.g. 2,510.) (b) Compute the break-even point in sales dollars under each of the alternative courses of action for 2022. (Round contribution margin ratio to 3 decimal places e.g. 0.251 and final answers to 0 decimal places, e.g. 2,510.) 2,794,500 $ $ $ Fixed $559,440 459,000 99,360 Break-even point $1,117,800 2149615 2700000 1588592
Ivanhoe Inc. had a bad year in 2021. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 86,400 units of product: net sales $2,160,000; total costs and expenses $2,413,800; and net loss $253,800. Costs and expenses consisted of the following. Cost of goods sold Selling expenses Administrative expenses 1. 2. 3. Management is considering the following independent alternatives for 2022. Break-even point $ 1. Variable $1,134,000 99,360 62,640 $2,413,800 $1,296,000 Total $1,693,440 558,360 Increase selling price 162,000 2. Change compensation Increase unit selling price 25% with no change in costs and expenses. Change the compensation of salespersons from fixed annual salaries totaling $216,000 to total salaries of $43,200 plus a 5% commission on net sales. 3. Purchase machinery Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50. (a) Compute the break-even point in sales dollars for 2021. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and final answer to 0 decimal places, e.g. 2,510.) (b) Compute the break-even point in sales dollars under each of the alternative courses of action for 2022. (Round contribution margin ratio to 3 decimal places e.g. 0.251 and final answers to 0 decimal places, e.g. 2,510.) 2,794,500 $ $ $ Fixed $559,440 459,000 99,360 Break-even point $1,117,800 2149615 2700000 1588592
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter5: The Income Statement And The Statement Of Cash Flows
Section: Chapter Questions
Problem 2MC: The following information is available for Cooke Company for the current year: The gross margin is...
Related questions
Question
Transcribed Image Text:Ivanhoe Inc. had a bad year in 2021. For the first time in its history, it operated at a loss. The company's income
statement showed the following results from selling 86,400 units of product: net sales $2,160,000; total costs
and expenses $2,413,800; and net loss $253,800. Costs and expenses consisted of the following.
Cost of goods sold
Selling expenses
Administrative expenses
1.
2.
3.
Break-even point $
1.
Total
$1,693,440
558,360
162,000
Management is considering the following independent alternatives for 2022.
Increase selling price
2. Change compensation
$2,413,800 $1,296,000
3. Purchase machinery
Variable
Increase unit selling price 25% with no change in costs and expenses.
Change the compensation of salespersons from fixed annual salaries totaling $216,000 to total salaries of
$43,200 plus a 5% commission on net sales.
$1,134,000
99,360
62,640
Purchase new high-tech factory machinery that will change the proportion between variable and fixed
cost of goods sold to 50:50.
(a) Compute the break-even point in sales dollars for 2021. (Round contribution margin ratio to 4 decimal
places e.g. 0.2512 and final answer to 0 decimal places, e.g. 2,510.)
2,794,500
$
(b) Compute the break-even point in sales dollars under each of the alternative courses of action for 2022.
(Round contribution margin ratio to 3 decimal places e.g. 0.251 and final answers to 0 decimal places, e.g.
2,510.)
$
$
Fixed
$559,440
459,000
Break-even point
99,360
2149615
$1,117,800
2700000
1588592
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 5 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning