Reference no: EM13983351

Candyland, Inc., produces a particularly rich praline fudge. Each 10-ounce box sells for $5.60. Variable unit costs are as follows:

Pecans                                       $0.70
Sugar                                        $0.35
Butter                                       $1.85
Other ingredients                         $0.34
Box, packing material                        $0.76
Selling commission                           $0.20

Fixed overhead cost is $32,300 per year. Fixed selling and administrative costs are $12,500 per year. Candyland sold 35,000 boxes last year.

Required

1.    What is the contribution margin per unit for a box of praline fudge? What is the contribution margin ratio?

2.    How many boxes must be sold to break even? What is the break-even sales revenue?

3.    What was Candyland's operating income last year?

4.    What was the margin of safety?

5.    Suppose that Candyland, Inc., raises the price to $6.20 per box but anticipates a sales drop to 31,500 boxes. What will the new break-even point in units be? Should Candyland raise the price? Explain.