$8 (b) Target income sales volume - 590,000 + [S16,000/(1 0,4)) $20 - $12 $90,000 + $26,667 14,583 units (c) Target income sales volume $90,000 15.000 units $20 - $12 - (10%)(820) (d) The new break-even point in units = $90.000($22 - $12) = 9,000 units The increase in unit CM due to the increase in unit sales price will cause the break-even point to drop from 11,250 units to 9,000 units. (e) The principal assumptions are: - Both sales revenue and expenses behave in a linear fashion within the specified range of activity, known as the relevant range. The sales mix remains constant throughout the budgeting period, h9 - Changes in inventories are negligible in amount. Total 4.14 The Candy Company is a wholesale distributor of candy. The company serves grocery, convenience, and drug stores in a large metropolitan area. Small but steady growth in sales has been achieved by the company over the past few years, while candy prices have been increasing The company is formulating its plans for the coming fiscal year. Presented below are the data used to project the current year's after-tax net income of $110,400. Average sales price per box $ 4.00 Average variable costs per box: Cost of candy $ 2.00 Selling 0.40 $ 2.40 Annual fixed costs: Selling $ 160,000 Administrative 280,000 Total $ 440,000 Expected annual sales volume (390,000 boxes) $1,560,000 Tax rate 40% Candy manufacturers have announced that they will increase prices of their products an average of 15 percent in the coming year due to increases in materials and labor costs. The Candy Company expects that all other costs will remain at the same rates or levels as the current year. (a) Determine the break-even point in boxes of candy for the current year. (6) Calculate the sales price per box that the company must charge to cover the 15 percent increase in the cost of candy and still maintain the current contribution margin ratio. (c) Determine the volume of sales in dollars the company must achieve in the coming year to maintain the same net income as projected for the current year if the sales price of candy remains at $4 per box and the cost of candy increases 15 percent