Werth & Garza Manufacturing's sales slumped badly in 2016 due to so many people purchasing gifts online. The company's income statement showed the following results from selling 500,000 units of product: net sales $2,125,000; total costs and expenses $2,500,000; and net loss $375,000. Costs and expenses consisted of the following:
Management is considering the following alternative for 2016:
Purchase new automated equipment that will change the proportion between variable and fixed expenses to 45% variable and 55% fixed.
Instructions
(a) Compute the break-even point in dollars for 2016.
(b) Compute the break-even point in dollars under the alternative course of action.

Question

Werth & Garza Manufacturing's sales slumped badly in 2016 due to so many people purchasing gifts online. The company's income statement showed the following results from selling 500,000 units of product: net sales $2,125,000; total costs and expenses $2,500,000; and net loss $375,000. Costs and expenses consisted of the following:  
Management is considering the following alternative for 2016:
Purchase new automated equipment that will change the proportion between variable and fixed expenses to 45% variable and 55% fixed.
Instructions
(a) Compute the break-even point in dollars for 2016.
(b) Compute the break-even point in dollars under the alternative course of action.

Quizplus · Accepted Answer

The Answer of Werth & Garza Manufacturing's sales slumped badly in 2016 due to so many people purchasing gifts online. The company's income statement showed the following results from selling 500,000 units of product: net sales $2,125,000; total costs and expenses $2,500,000; and net loss $375,000. Costs and expenses consisted of the following:  
Management is considering the following alternative for 2016:
Purchase new automated equipment that will change the proportion between variable and fixed expenses to 45% variable and 55% fixed.
Instructions
(a) Compute the break-even point in dollars for 2016.
(b) Compute the break-even point in dollars under the alternative course of action.

Werth & Garza Manufacturing's Sales Slumped Badly in 2016 Due