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# Galati Manufacturing had a bad year in 2005. For the first time in its history it operated at a loss. The company's income statement showed the...

Galati Manufacturing had a bad year in 2005. For the first time in its history it operated at a loss. The company's income statement showed the following results from selling 60,000 units of product: Net sales \$1,500,000; total costs and expenses \$1,740,000; and net loss \$240,000. Costs and expenses consisted of the following.
Total Variable Fixed
Cost of goods sold \$1,200,000 \$780,000 \$420,000
Selling expenses 420,000 65,000 355,000
\$1,740,000 \$900,000 \$840,000
Management is considering the following independent alternatives for 2006.
1. Increase unit selling price 20% with no change in costs and expenses.
2. Change the compensation of salespersons from fixed annual salaries totaling \$200,000 to total salaries of \$30,000 plus a 6%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 2006

Compute the break-even point in dollars under each of the alternative courses of action. Which course of action do you recommend?

Galati Manufacturing had a bad year in 2005. For the first time in its history it operated at a loss. The  company's income statement showed the following results from selling 60,000 units of product: Net sales  \$1,500,000; total costs and expenses \$1,740,000; and net loss \$240,000. Costs and expenses consisted  of the following.                                                 Total Variable Fixed Cost of goods sold \$1,200,000 \$780,000 \$420,000 Selling expenses 420,000 65,000 355,000 Administrative expenses 120,000 55,000 65,000 \$1,740,000 \$900,000 \$840,000 Management is considering the following independent alternatives for 2006. 1. Increase unit selling price 20% with no change in costs and expenses. 2. Change the compensation of salespersons from fixed annual salaries totaling \$200,000 to total salaries of \$30,000 plus a 6%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 2006 Compute the break-even point in dollars under each of thealternative courses of action. Which course of  action do you recommend?

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