Breakeven point, what if analysis Air Peanut Company manufactures and sells roasted peanut packets to commercial airlines. Following are the price and cost data per 100 packets of peanuts:
|
Estimated annual sales volume 11,535,700 packets |
|
|
Selling price |
$35.00 |
|
Variable costs: |
|
|
Raw materials |
$16.00 |
|
Direct labor |
7 |
|
Manufacturing support |
4 |
|
Selling expenses |
1.6 |
|
Total variable costs per 100 packets |
$28.60 |
|
Annual fixed costs: |
|
|
Manufacturing support |
$192,000 |
|
Selling and administrative |
276,000 |
|
Total fixed costs |
$468,000 |
Required
(a) Determine Air Peanut’s breakeven point in units.
(b) How many packets does Air Peanut have to sell to earn $156,000?
(c) Air Peanut expects its direct labor costs to increase by 5% next year. How many units will it have to sell next year to break even if the selling price remains unchanged?
(d) If Air Peanut’s direct labor costs increase by 5%, what selling price per 100 packets must it charge to maintain the same contribution margin to sales ratio?