a) Determine the break-even in sales dollars for the Skinny-Bar product and show a variable costing income statement based on the information provided in Exhibit 1 for actual sales. The income statement must include the cost of direct materials, direct labour, variable manufacturing overhead, fixed manufacturing overhead, and fixed general and administrative costs.

b) what will a lifetime cost analysis of Skinny-Bar and propose a selling price for this new product based on BBCC's markup policy. The overhead costs, the batch size, the machine hours per batch, the number of inspections per batch, set up times and the number of product lines should be based on the activity-based analysis prepared in requirement 1 using the batch size for the The-Bar product. Direct labour hours per batch is 22.5. Product costs are based on one product line. Lifetime research and development costs are $900,000 for the Skinny-Bar. Use the activity rates calculated in requirement 1 as well. Compare the proposed price with the selling price set at the time of the initial introduction of this product. Discuss the adequacy of this new proposed price.

Exhibit 1

Planning notes from the 20X5 launch of the Skinny-Bar 20X5

actual sales $288,600

Total manufacturing costs 230,880

(Total manufacturing cost consists of $115,440 in prime costs and $147,186 in conversion costs.)

The contribution margin ratio for this product was 35%.

156,000 bars were sold at $1.85 per bar.

This was a pilot project of the product, so there were no beginning or ending inventories associated with the product. All non-manufacturing costs relating to this product are fixed.

The margin of safety percentage for the product at this sales level was -15%. The profit margins on the company's current products can be found below in Exhibit 2. The most profitable product is the Salt-Lick bar at 25.9%, followed by Alamonde at 19.3% and The-Bar at 18.8%. Budgeted margins were 14.3%, 27.5%, and 35.2% for The-Bar, Alamonde, and Salt-Lick, respectively.

EXHBIT 2 IS ATTACH

Exhibit 2 Actual operating income statement For the year ended December 31, 20X7 The-Bar Per Alamonde Per Salt-Lick Por Total bar bar bar Volume 776,000 528,000 302,500 1,606,500 Sales $1,164,000 $1.50 $ 897,600 $1.70 $ 605,000 $2.00 $2,666,600 Cost of goods 945,595 724,672 448,187 2,118.454 sold Gross margin $ 218,405 $ 172,928 $ 156,813 $ 548,146 Selling and 541,681 administrative expenses Operating 6.465 income Gross margin % 18.8% 19.3% 25.9% 20.6% Budgeted operating income statement For the year ended December 31, 20X7 The-Bar Per Alamonde Per Salt-Lick Per Total bar bar bar Volumes 774,400 529,100 301,400 1,604,900 Sales $1,161,600 $1.50 $ 952,380 $1.80 $ 602,800 $2.00 $2,716,780 Cost of goods 996.034 690.756 390.297 2.077.087 sold Gross margin $ 165,566 $ 261,624 $ 212,503 $ 639.693 542.554 Selling and administrative expenses $ 97.139 Operating income 14.3% 27.5% 35.2% 23.5% Gross margin %