ADM 2341 Managerial Accounting Solution Ch 4 Capstone Problem All Day Candy Company is a wholesale distributor of candy. The company services grocery, convenience, and drugstores in a large metropolitan area. Small but steady growth in sales has been achieved by the All-Day Candy Company over the past few years while candy prices have been increasing. The company is formulating its plans for the coming fiscal year July 1, 2009 to June 30, 2010. Presented below are the data used to project the current year's (July 1, 2008 to June 30, 2009) operating income of $184,000. Average selling price $4.00 per box Average variable expenses Cost of candy Selling expenses Total $2.00 per box 0.40 $2.40 per box Annual fixed expenses Selling Administrative Total $160,000 280,000 $440,000 Expected annual sales volume (390,000 boxes) $1,560,000 Manufacturers of candy have announced that they will increase prices of their products an average of 15 percent in the coming year due to increases in materials (sugar, cocoa, peanuts, etc.) and labor expenses. All-Day Candy Company expects that all other expenses will remain at the same rates or levels as the current year. REQUIRED What is All-Day Candy Company's breakeven point in boxes of candy for the current year? What selling price per box must All-Day Candy Company charge to cover the 15 percent increase in the cost of candy and still maintain the current average contribution margin per box? What volume of sales in boxes must the All-Day Candy Company achieve in the coming year (July 1, 2009 to June 30, 2010) in order to maintain the same operating income ($184,000) as projected for the current year if the selling price of candy remains at $4.00 per box and the cost of candy increases 15 percent? All-Day Candy is considering adding a new product line, Taco Chips, to their range of products. They expect that these would sell for $6.00 for a box of four and would cost $3.00 from the manufacturer and have selling costs of $1.00 per box. There would be no additional fixed costs. They expect that chips would be about 10% of their sales volume in boxes in the coming year. What volume of sales in boxes of candy and chips must the All-Day Candy Company achieve in the coming year to maintain the same operating income as projected for the current year if the selling price of candy remains at $4.00 per box and the cost of candy increases 15 percent as in part 3? Briefly explain the reason for the difference in the total volume in parts 3 and 4