The Boxed Candy\'s current years net income is $184,000. Selling price per box $
ID: 2352903 • Letter: T
Question
The Boxed Candy's current years net income is $184,000.Selling price per box $4.00
Selling commission per box $.40
Office rental $70,000
Advertising $60,000
Cost per box $2.00
Salaries $280,000
Insurance $30,000
Expected annual sales volume 390,000 boxes
What is the breakeven point in boxes of candy for the current year?
What volume of sales in dollars must be achieved in the coming year in order to breakeven if the selling price stays at $4.00 but the cost of candy increases by 20%?
What volume of sales in dollars must be achieved in the coming year in order to maintain the same net income as projected for the current year if the selling price stays at $4.00 but cost of candy increases by 20%?
Explanation / Answer
What is the breakeven point in boxes of candy for the current year? Total Fixed costs = Office rental $70,000 +Advertising $60,000 +Salaries $280,000 + Insurance $30,000 = $440,000 Cont magin per box = SP pu - VC pu = $4-($2+$0.40) = $1.60 So BEP = FC/Cont pu = 440,000/1.60 = 275,000 Boxes What volume of sales in dollars must be achieved in the coming year in order to breakeven if the selling price stays at $4.00 but the cost of candy increases by 20%? New Cot of acndy = 1.20*$2 = $2.40 So New COnt pu = $4 - ($2.40+$0.40) = $1.20 So BEP = FC/Cont pu = 440,000/1.20 = 366,667 Boxes So BEP in $$$ = 366,667 *$4 = $1,466,667 What volume of sales in dollars must be achieved in the coming year in order to maintain the same net income as projected for the current year if the selling price stays at $4.00 but cost of candy increases by 20%? Earlier Sales - Var Cost = Fixed Cost + Net Income = 440,000+184,000 = 624,000 ie Total Cont = 624,000 ie No of Boxes*Cont pu = 624000 ie No fo Boxes = 624000/Cont pu = 624000/1.20 = 520,000 Boxes So Sales reqd = 520,000*$4 = 2,080,000
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