Rapunzel Company currently sells a single product, shampoo, for $4 per bottle. The variable cost per bottle is $3. Rapunzel’s fixed cost totals $10,000.

Required: (1) Compute the following amounts for Rapunzel Company:

(a) Contribution margin per bottle of shampoo

(b) Break-even point in bottles of shampoo

(c) The profit that Rapunzel will earn at a sales volume of 25,000 bottles of shampoo

(d) The number of bottles of shampoo that Rapunzel must sell to earn a profit of $16,000

(2) Rapunzel is considering increasing its total fixed cost to $12,000 and then also increasing the selling price of its product to $5.The variable cost per bottle of shampoo would remain unchanged. Repeat the computations from

(1), using this new information. Will this decision be a good one for Rapunzel? Why or why not?

(3) Draw a graph with four lines to show the following:

(a) Total contribution margin earned when Rapunzel sells from 0 to 10,000 bottles of shampoo at a selling price of $4 per bottle

(b) Total contribution margin earned when Rapunzel sells from 0 to 10,000 bottles of shampoo at a selling price of $5 per bottle

(c) Rapunzel’s fixed cost total of $10,000

(d) Rapunzel’s fixed cost total of $12,000

(e) Rapunzel’s break-even point in bottles of shampoo before and after the selling price and fixed cost changes Does the graph support your conclusion in (2) above? If so, how does it support your conclusion? If not, what new or different information did you get from the graph?