Question: ScholarPak Company produced and sold 70 000 backpacks during the year

ScholarPak Company produced and sold 70,000 backpacks during the year just ended at an average price of $ 30 per unit. Variable manufacturing costs were $ 12 per unit, and variable marketing costs were $ 6 per unit sold. Fixed costs amounted to $ 540,000 for manufacturing and $ 216,000 for marketing. There was no year-end work-in-process inventory. (Ignore income taxes.)

1. Compute ScholarPak’s break- even point in sales dollars for the year.
2. Compute the number of sales units required to earn a net income of $ 540,000 during the year.
3. ScholarPak’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 ScholarPak’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.
(CMA, adapted)

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  • CreatedApril 22, 2014
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