Acct. 2 HW

ACCT2PART21.4.docx

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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.

Collapse question part

(a)

Compute the break-even point in dollars for 2020.

Break-even point