Pharoah Inc. had a bad year in 2021. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 89,600 units of product: net sales $2,240,000; total costs and expenses $2,503,200; and net loss $263,200. Costs and expenses consisted of the following. Cost of goods sold Selling expenses Administrative expenses 1. 2. Total $1,756,160 3. 579,040 Variable $1,176,000 $580,160 476,000 103,040 $2,503,200 $1,344,000 $1,159,200 168,000. Management is considering the following independent alternatives for 2022, Fixed 103,040 64,960 Increase unit selling price 25% with no change in costs and expenses. Change the compensation of salespersons from fixed annual salaries totaling $224,000 to total salaries of $44,800 plus a 5% commission on net sales. Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50-50
Pharoah Inc. had a bad year in 2021. For the first time in its history, it operated at a loss. The company's income statement showed the following results from selling 89,600 units of product: net sales $2,240,000; total costs and expenses $2,503,200; and net loss $263,200. Costs and expenses consisted of the following. Cost of goods sold Selling expenses Administrative expenses 1. 2. Total $1,756,160 3. 579,040 Variable $1,176,000 $580,160 476,000 103,040 $2,503,200 $1,344,000 $1,159,200 168,000. Management is considering the following independent alternatives for 2022, Fixed 103,040 64,960 Increase unit selling price 25% with no change in costs and expenses. Change the compensation of salespersons from fixed annual salaries totaling $224,000 to total salaries of $44,800 plus a 5% commission on net sales. Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50-50
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter2: Basic Cost Management Concepts
Section: Chapter Questions
Problem 25E: Last year, Orsen Company produced 25,000 juicers and sold 26,500 juicers for 60 each. The actual...
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