2. New product analysis and pricing - Skinny-Bar (18 marks) a) (7 marks) Determine the break-even...

 

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2. New product analysis and pricing - Skinny-Bar (18 marks) a) (7 marks) Determine the break-even in sales dollars for the Skinny-Bar product and prepare a variable costing income statement based on the information provided in Exhibit 1 for actual sales. The income statement must include the cost of direct materials, direct labour, variable manufacturing overhead, fixed manufacturing overhead, and fixed general and administrative costs. Exhibit 1 Planning notes from the 20X5 launch of the Skinny-Bar 20X5 actual sales $288,600 230,880 Total manufacturing costs (Total manufacturing cost consists of $115,440 in prime costs and $147,186 in conversion costs.) The contribution margin ratio for this product was 35%. 156,000 bars were sold at $1.85 per bar. This was a pilot project of the product, so there were no beginning or ending inventories associated with the product. All non-manufacturing costs relating to this product are fixed. The margin of safety percentage for the product at this sales level was -15%. The profit margins on the company's current products can be found below in Exhibit 2. The most profitable product is the Salt-Lick bar at 25.9%, followed by Alamonde at 19.3% and The-Bar at 18.8%. Budgeted margins were 14.3%, 27.5%, and 35.2% for The-Bar, Alamonde, and Salt-Lick, respectively. 2. New product analysis and pricing - Skinny-Bar (18 marks) a) (7 marks) Determine the break-even in sales dollars for the Skinny-Bar product and prepare a variable costing income statement based on the information provided in Exhibit 1 for actual sales. The income statement must include the cost of direct materials, direct labour, variable manufacturing overhead, fixed manufacturing overhead, and fixed general and administrative costs. Exhibit 1 Planning notes from the 20X5 launch of the Skinny-Bar 20X5 actual sales $288,600 230,880 Total manufacturing costs (Total manufacturing cost consists of $115,440 in prime costs and $147,186 in conversion costs.) The contribution margin ratio for this product was 35%. 156,000 bars were sold at $1.85 per bar. This was a pilot project of the product, so there were no beginning or ending inventories associated with the product. All non-manufacturing costs relating to this product are fixed. The margin of safety percentage for the product at this sales level was -15%. The profit margins on the company's current products can be found below in Exhibit 2. The most profitable product is the Salt-Lick bar at 25.9%, followed by Alamonde at 19.3% and The-Bar at 18.8%. Budgeted margins were 14.3%, 27.5%, and 35.2% for The-Bar, Alamonde, and Salt-Lick, respectively.

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Let a be total direct material cost Let b be total direct labor cost Let c be total factory overhead ... View the full answer