Reference no: EM132650006

Yummy Juice Ltd sells bottles of freshly squeezed juice to small convenience stores throughout Melbourne. Its latest income statement for the last 12 months is as follows:

Yummy Juice Ltd
Income statement

Sales (100,000 bottles X $6)          $600,000

Less: Cost of sales:

Direct materials (100,000 X $2.00)    $200,000

Direct Labours (100,000 X $1.50)    150,000

Variable overhead (100,000 X $0.50)      50,000
                                                     400,000

Gross profit                                    $200,000

Less: Other expenses

Fixed Advertising expenses               $10,000

Manager's salary                               50,000

Fixed Occupancy and admin expenses 20,000
                                                  $80,000

Profit                                          $120,000

Required

Question a) Calculate the contribution margin per juice bottle.

Question b) Calculate the number of juice bottles to break even in both units and sales dollars.

Question c) The company expects to sell 115 000 units in the coming year. How much profit will the business make for the year if its estimated level of activity is accurate?

Question d) It is predicted that the fixed occupancy and admin expenses will increase to $100,000. Direct materials per unit will also increase to $3.5 per unit. As a result, the selling price will increase to $9 per unit. How many bottles of juice Yummy Juice Ltd will have to sell to be able to achieve the same level of profit in part c. Comments on the outcome of the change.