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In the month of June, Jose Hebert s Beauty Salon gave 3,580 haircuts, shampoos, and permanents at an average price of \$36. During the month, fixed costs were \$16,870 and variable costs were 75% of sales.

 (a)

Determine the contribution margin in dollars, per unit and as a ratio. (Round contribution margin per unit and contribution margin ratio to 2 decimal places, e.g. \$5.25 & 10.50%.)

 Contribution margin \$ Contribution margin per unit \$ Contribution margin ratio %
 Problem 6-1A

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 75,400 units of product: Net sales \$1,485,380; total costs and expenses \$1,736,000; and net loss \$250,620. Costs and expenses consisted of the following.

 Total Variable Fixed Cost of goods sold \$1,201,500 \$779,500 \$422,000 Selling expenses 426,800 78,300 348,500 Administrative expenses 107,700 46,500 61,200 \$1,736,000 \$904,300 \$831,700

Management is considering the following independent alternatives for 2014.

 1 Increase unit selling price 28% with no change in costs and expenses. 2 Change the compensation of salespersons from fixed annual salaries totaling \$202,700 to total salaries of \$42,700 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 \$

(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 \$ 2. Change compensation \$ 3. Purchase machinery \$

Which course of action do you recommend Alternative 1Alternative 2Alternative 3

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