CVP Question: Cost of candy Gundy Company is a wholesale distributor of candy. The company services grocery, convenience and drug stores in a large metropolitan area Candy Company has achieved small but steady growth in sales over the past few years, but prices have also been increasing. The company is formulating its plans for the coming fiscal year Average selling price $8.00 per box Average variable costs $4.00 per box Selling Expenses 0.80 per box Fixed selling expenses $320,000 Fixed administrative expenses $560.000 The expected annual sales volume (780.000 boxes) is $8 24 million and the tax rate is 40% The manufacturers of candy (ie, your suppliers) have announced that they will increase prices of their products by an average of 15% in the coming year because of increases in raw material (sugar, cocoa, peanuts, etc.) and labour costs. The company expects that all other costs will remain at the same rates or levels as during the current year Required 1. What is Candy Company's break-even point in boxes of candy for the current year? 2 What selling price per box must Candy Company charge to cover the 15% increase in variable costs of candy and still maintain the current contribution margin ratio? 3. What volume of sales in dollars must Candy Company achieve in the coming year to keep the same net income after taxes that was projected for the current year if the selling price of candy remains at $8 per box and the cost of candy increases by 15%? Please comment. 4. The marketing/sales team states they need $40,000 in advertising to increase sales of the Candy by 10%. Would we allow them to spend the advertising dollars? How much must sales increase to offset the advertising expense? 5. ETC Great question to expand knowledge, both qualitative and quantitative. 6