Multiple breakeven points Last month, Capetini Capacitor Company sold capacitors to its distributors for $250 per capacitor.

Question:

Multiple breakeven points Last month, Capetini Capacitor Company sold capacitors to its distributors for $250 per capacitor. The sales level of 3,000 capacitors per month was less than the single-shift capacity of 4,400 capacitors at its plant located in San Diego. Variable production costs were $100 per capacitor, and fixed production costs were $200,000 per month. In addition, variable selling and distribution costs are $20 per capacitor, and fixed selling and distribution costs are $62,500 per month. At the suggestion of the marketing department, this month Capetini reduced the sales price to $200 and increased the monthly advertising budget by $17,500. Sales are expected to increase to 6,800 capacitors per month. If the demand exceeds the single-shift capacity of 4,400 capacitors, the plant needs to be operated in two shifts. Two-shift operation will increase monthly fixed production costs to $310,000.

Required

(a) Determine the contribution margin per capacitor last month.

(b) Determine the sales level in number of capacitors at which the profit-to-sales ratio would be 10% for last month.

(d) Determine the sales level in number of capacitors at which the profit-to-sales ratio this month is the same as the actual profit-to-sales ratio last month. Is there more than one possible sales level at which this equality would occur?

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