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What is the operating income

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Question - Candy offers three doughnut products, a full dozen, half dozen, and the doughnut pop, with contribution margins of $5.84, $4.49, and $2.27, respectively. She is estimating sales of 221,400 individual doughnuts in the coming period, consisting of 14,400 units of the full dozen, 7,200 units of the half dozen, and 5,400 of the doughnut pops. The estimated fixed costs for the period are $92,620. Revenue and fixed production labor costs for coffee are ignored in this problem.

Required -

1. What is the company's breakeven point in individual doughnuts, assuming that the given sales mix is maintained?

2. If the sales mix is maintained, what is the total contribution margin when 221,400 doughnuts are sold? What is the operating income?

3. What would the operating income be if the company sold, 9,600 units of the full dozen and 16,000 of the half dozen and 7,000 doughnut pops? What is the new breakeven point in units if these relationships persist in the next period?

4. Comparing the breakeven points in requirements 1 and 3, is it always better for a company to choose the sales mix that yields the lower breakeven point? Explain.

Reference no: EM132904637

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