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Tanek Corp.s sales slumped badly in 2017. For the first time in its history, it operated at a loss. The companys income statement showed the following results from selling 520,500 units of product: sales $2,602,500, total costs and expenses $2,706,600, and net loss $104,100. Costs and expenses consisted of the amounts shown below.

		Total		Variable		Fixed
Cost of goods sold		$2,227,740		$1,655,190		$572,550
Selling expenses		260,250		95,772		164,478
Administrative expenses		218,610		70,788		147,822
		$2,706,600		$1,821,750		$884,850

Management is considering the following independent alternatives for 2018.

1.		Increase unit selling price 22% with no change in costs, expenses, and sales volume.
2.		Change the compensation of salespersons from fixed annual salaries totaling $156,150 to total salaries of $62,460 plus a 6% commission on sales.

(a) Compute the break-even point in dollars for 2017. (Round final answer to 0 decimal places, e.g. 1,225.)

Break-even point

$

(b) Compute the contribution margin under each of the alternative courses of action. (Round final answer to 0 decimal places, e.g. 1,225.)

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. (Round selling price per unit to 2 decimal places, e.g. 5.25 and other calculations to 0 decimal places, e.g. 20% and also final answer to 0 decimal places, e.g. 1,225.)

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

Which course of action do you recommend? Alternative 1Alternative 2

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