Break-even point in boxes of candy
Course:- Managerial Accounting
Reference No.:- EM1347134

Assignment Help
Expertsmind Rated 4.9 / 5 based on 47215 reviews.
Review Site
Assignment Help >> Managerial Accounting

Scarborough Confectionery Company is a wholesale distributor of boxes of chocolates. The company services grocery, convenience and drug stores in the Toronto area.

Existing Situation
Small but steady growth in sales has been achieved by the company over the past years while candy prices have been increasing. The company is formulating its plans for the coming year. Presented below are the data used to project the current year's after-tax net income of $270,000.

Average selling price per box $5.50
Average variable costs per box:
Cost of candy 2.50
Selling expenses 0.50
Total 3.00
Annual fixed costs:
Selling 200,000
Administrative 350,000
Total 550,000
Expected annual sales volume (400,000) 1,950,000
Tax rate 40%

Projected Situation
Manufacturers of chocolate have announced that they will increase prices of their products an average of 15% in the coming year, owing to increases in raw materials (sugar, cocoa, peanuts, etc) and labor costs. Scarborough Confectionary Company expects that all other costs will remain at the same rates or levels as in current year.


1. What is the break-even point in boxes of candy for the company under the existing situation?

2. What selling price per box must the company charge to cover the 15% increase in the cost of the raw materials i.e., candy, and still maintain the current contribution margin ratio.

3. What volume of sales in dollars must Friendly achieve in the coming year to maintain the same net income after taxes projected for the current year if the selling price of candy remains at $5.5 per box and the cost of raw materials increases 15%?

4. What strategies might the company use to maintain the same net income after taxes as projected for the current year?

Put your comment

Ask Question & Get Answers from Experts
Browse some more (Managerial Accounting) Materials
Construct the company's direct labor budget for the upcoming fiscal year, assuming that the direct labor workforce is adjusted each quarter to match the number of hours requir
Indicated below whether each item is a separate performance obligation and allocate the transaction price of 120,000 Pro tab Packages to the separate performance obligations i
Wonder Enterprises uses a special scanner in its operations.  Lately sales have increased to the point that it takes extra hours of overtime at night and on weekends to keep u
Which provides the best information on profitability: a single overhead cost pool with head- count as the allocation base, or multiple cost pools using headcount, sales, and s
Prepare the appropriate journal entry for each of the items above (a. through j.). You can assume that all transactions with employees, customers, and suppliers were conduct
This question is on variance analysis in managerial or cost accounting. More specifically, it asks for computations of direct material price variance, direct material effici
What is the business statement of work agreed upon for other clients we are delaying the orders? Are we penalize if we don't deliver at the promised date? How would this aff
Are manufacturing overhead costs fixed, variable, or mixed? Explain and graph Renkas Industries' manufacturing overhead costs against DL hours. Use Excel or graph by hand.