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Candyland Inc. produces a particularly rich praline fudge. Each 10-ounce box sells for $5.60. Variable unit costs are as follows: 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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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773
BuyFind

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773

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Chapter
Section
Chapter 7, Problem 62P
Textbook Problem

Candyland Inc. produces a particularly rich praline fudge. Each 10-ounce box sells for $5.60. Variable unit costs are as follows:

Chapter 7, Problem 62P, Candyland Inc. produces a particularly rich praline fudge. Each 10-ounce box sells for 5.60.

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. 1. What is the contribution margin per unit for a box of praline fudge? What is the contribution margin ratio?
  2. 2. How many boxes must be sold to break even? What is the break-even sales revenue?
  3. 3. What was Candyland’s operating income last year?
  4. 4. What was the margin of safety in sales dollars?
  5. 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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Chapter 7 Solutions

Managerial Accounting: The Cornerstone of Business Decision-Making
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