Crane Corps 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 505,500 units of product: sales $2,527,500, total costs and expenses $2.622.000, and net loss 594,500. Costs and expenses consisted of the amounts shown below. Cost of goods sold Selling expenses Administrative expenses Total $2,156,940 252,750 212,310 $2,622,000 Variable $1,658,040 93,012 68,748 $1,819,800 Fixed $498,900 159,738 143,562 $802,200 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 $151,650 to total salaries of $60,660 plus a % commission on sales.
Compute the break-even point in dollars for 2020.
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 Which course of action do you recommend?