MA67 Problem: Cost Volume Profit Analysis - All-Day Candy Company

MA67 Problem: Cost Volume Profit Analysis - All-Day Candy Company

All-Day Candy Company is a wholesale distributor of candy. The company services grocery,convenience, and drug stores in a large metropolitan area. All-Day has achieved small but steady growthin sales over the past few years while candy prices have been increasing. The company is formulating its plans for the coming fiscal year. Following are the data used to project the current year's after-tax netincome of $110,400.Average selling price $4.00per boxAverage variable costs:Cost of candy $2.00per boxSelling expenses 0.40per box$2.40per boxAnnual fixed costs:Selling $ 160,000Administrative 280,000$ 440,000Expected annual sales volume (390,000 boxes) $1,560,000Tax rate 40%Manufacturers of candy have announced that they will increase prices of their products an average of 15%in the coming year due to increases in raw materials (sugar, cocoa, peanuts, and so on) and labour costs.All-Day Candy Company expects that all other costs will remain at the same rates or levels as the currentyear.

 Required:

a. How was the $110,400 net income figure calculated? b. What is All-Day Candy Company's breakeven in boxes of candy for the current year?c. What selling price per box must All-Day Candy Company charge to cover the 15% increase inthe cost of candy and still maintain the current CM ratio?d. What volume of sales in dollars must the All-Day Candy Company achieve in the coming year tomaintain the same net income after taxes as projected for the current year if the selling price of candy remains at $4 per box and the cost of candy increases 15%?e. How many units would have to be sold next year to generate a net income equal to 10% of revenue