ACC - CollegePak Company

CollegePak Company produced and sold 60,000 backpacks during the year just ended at an average price of $20 per unit. Variable manufacturing costs were $8 per unit, and variable marketing costs were $4 per unit sold. Fixed costs amounted to $180,000 for manufacturing and $72,000 for marketing. There was no year-end work-in-process inventory. (Ignore income taxes.)

1. Compute CollegePak’s break-even point in sales dollars for the year.

2. Compute the number of sales units required to earn a net income of $180,000 during the year.

3. CollegePak’s variable manufacturing costs are expected to increase by 10 percent in the coming year. Compute the firm’s break-even point in sales dollars for the coming year.

4. If CollegePak’s variable manufacturing costs do increase by 10 percent, compute the selling price that would yield the same contribution-margin ratio in the coming year.