# Fredonia Inc. Breakeven Analysis

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# Fredonia Inc. had a bad year in 2013. For the first time in its history, it operated at a loss….

Fredonia Inc. had a bad year in 2013. For the first time in its history, it operated at a loss. The company’s income statement showed the following results from selling 78,000 units of product: Net sales \$1,536,600; total costs and expenses \$1,740,200; and net loss \$203,600. Costs and expenses consisted of the following.

 Total Variable Fixed Cost of goods sold \$1,202,800 \$780,600 \$422,200 Selling expenses 423,500 78,900 344,600 Administrative expenses 113,900 52,700 61,200 \$1,740,200 \$912,200 \$828,000

Management is considering the following independent alternatives for 2014.

 1 Increase unit selling price 29% with no change in costs and expenses. 2 Change the compensation of salespersons from fixed annual salaries totaling \$203,800 to total salaries of \$43,200 plus a 5% 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.

(a) Compute the break-even point in dollars for 2014. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and final answers to 0 decimal places, e.g. 2,510.)

 Break-even point \$2038950

(b) Compute the break-even point in dollars under each of the alternative courses of action. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and final answers to 0 decimal places, e.g. 2,510.)

 Break-even point 1. Increase selling price \$2629935 2. Change compensation \$ 3. Purchase machinery \$ Click here to have a similar paper done for you by one of our writers within the set deadline at a discounted…

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