Blossom 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 575,500 units of product: sales $2,877,500, total costs and expenses $2,984,880, and net loss $107,380. Costs and expenses consisted of the amounts shown below. Total Variable FixedCost of goods sold $2,455,420 $1,887,640 $567,780Selling expenses 287,750 105,892 181,858Administrative expenses 241,710 78,268 163,442 $2,984,880 $2,071,800 $913,080Management 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 $172,650 to total salaries of $69,060 plus a 4% commission on sales. Compute the break-even point in dollars for 2020. Break-even point $ Compute the contribution margin under each of the alternative courses of action. (Round contribution margin ratio to 0 decimal places, e.g. 50%.)Contribution margin for alternative 1 %Contribution margin for alternative 2 %Compute the break-even point in dollars under each of the alternative courses of action. Break-even point for alternative 1 $Break-even point for alternative 2 $

Name: Blossom Corp.’s sales slumped badly in 2020. For the first time in its
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Description: Blossom 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 575,500 units of product: sales $2,877,500, total costs and expenses $2,98

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Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 35P

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Blossom 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 575,500 units of product: sales $2,877,500, total costs and expenses $2,984,880, and net loss $107,380. Costs and expenses consisted of the amounts shown below.

	Total	Variable	Fixed
Cost of goods sold	$2,455,420	$1,887,640	$567,780
Selling expenses	287,750	105,892	181,858
Administrative expenses	241,710	78,268	163,442
	$2,984,880	$2,071,800	$913,080

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 $172,650 to total salaries of $69,060 plus a 4% commission on sales.

Compute the break-even point in dollars for 2020.

Break-even point

Compute the contribution margin under each of the alternative courses of action. (Round contribution margin ratio to 0 decimal places, e.g. 50%.)

Contribution margin for alternative 1		%
Contribution margin for alternative 2		%

Compute the break-even point in dollars under each of the alternative courses of action.

Break-even point for alternative 1		$
Break-even point for alternative 2		$

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