Posted: April 13th, 2023
Acct. 2 HW
Pharoah Corp.’s 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 595,500 units of product: sales $2,977,500, total costs and expenses $3,076,750, and net loss $99,250. Costs and expenses consisted of the amounts shown below.
Total Variable Fixed
Cost of goods sold $2,528,890 $2,042,565 $486,325
Selling expenses 297,750 109,572 188,178
Administrative expenses 250,110 80,988 169,122
$3,076,750 $2,233,125 $843,625
Management is considering the following independent alternatives for 2021.
1. Increase unit selling price 25% with no change in costs, expenses, and sales volume.
2. Change the compensation of salespersons from fixed annual salaries totaling $178,650 to total salaries of $71,460 plus a 5% commission on sales.
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(a)
Compute the break-even point in dollars for 2020.
Break-even point $
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