Candyland Inc. produces a particularly rich praline fudge. Each 10-ounce box sells for $5.60.Variable unit costs are as follows:Pecans $0.70Sugar 0.35Butter 1.85Other ingredients 0.34Box, packing material 0.76Selling commission 0.20Fixed overhead cost is $32,300 per year. Fixed selling and administrative costs are $12,500per year. Candyland sold 35,000 boxes last year.Required:1. What is the contribution margin per unit for a box of praline fudge? What is thecontribution margin ratio?2. How many boxes must be sold to break even? What is the break-even sales revenue?3. What was Candyland’s operating income last year?4. What was the margin of safety in sales dollars? 5. CONCEPTUAL CONNECTION Suppose that Candyland Inc. raises the price to $6.20 perbox but anticipates a sales drop to 31,500 boxes. What will be the new break-even point inunits? Should Candyland raise the price? Explain.
Candyland Inc. produces a particularly rich praline fudge. Each 10-ounce box sells for $5.60.
Variable unit costs are as follows:
Pecans $0.70
Sugar 0.35
Butter 1.85
Other ingredients 0.34
Box, packing material 0.76
Selling commission 0.20
Fixed overhead cost is $32,300 per year. Fixed selling and administrative costs are $12,500
per year. Candyland sold 35,000 boxes last year.
Required:
1. What is the contribution margin per unit for a box of praline fudge? What is the
contribution margin ratio?
2. How many boxes must be sold to break even? What is the break-even sales revenue?
3. What was Candyland’s operating income last year?
4. What was the margin of safety in sales dollars?
5. CONCEPTUAL CONNECTION Suppose that Candyland Inc. raises the price to $6.20 per
box but anticipates a sales drop to 31,500 boxes. What will be the new break-even point in
units? Should Candyland raise the price? Explain.
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