Jordan and Taylor are beginning to understand break-evenanalysis.
Selling price to Yumminess at $10 per tin. The cost is $8 pertin, which includes $6 of direct material and $1.50 of directlabor. Annual manufacturing overhead is estimated at $100,000 forthe expected sales of 200,000 tins. Operating expenses areprojected to be $80,000 annually.
After looking over the costs for manufacturing overhead andoperating expenses, you approximate that 85% of manufacturingoverhead and 20% of operating expenses are variable costs.They arenow discussing options with adjustments to costs and sales. As longas they keep bringing brownies, you keep turning out numbers.
1. Jordan and Taylor are considering an advertisingcampaign for $40,000 annually. They expect this to increase salesby 5%. What would be the new net income? (5 points)
2. Yumminess wants to feature Chocolate Attack Browniesas a monthly special. The predicted sales volume is 50,000 tins.Yumminess wants Jordan and Taylor to cut their selling pricing by10%, citing that the volume will more than make up the difference.What will be the break-even point in tins during this sale? (5points)
3. Yumminess wants to feature Chocolate Attack Browniesas a monthly special. The predicted sales volume is 50,000 tins.Yumminess wants Jordan and Taylor to cut their selling pricing by10%, citing that the volume will more than make up the difference.What net income can Jordan and Taylor expect during this offer? (5points)
