Dark and bold INC.....
Dark and Bold Inc. manufactures a line of single-cup brewing machines for home and ofce use that brew a cup of coffee, tea, or hot chocolate in less than a minute. The machines use specially packaged portions of coffee, tea. or hot chocolate that can be purchased online directly from Dark and Bold or at Second Cup coffee shops who are licensed to distribute the company's products. The appeal of the brewing machines is twofold. First, they offer a high level of convenience. The use of prepackaged coffee servings means no grinding of coffee beans and no mess. Also, the brewing machines have a water reservoir that for some models is large enough to make up to 20 cups of coffee. Second, the taste of each cup of coffee, tea, and hot chocolate is very consistent. The brewers' pressurized system uses the same amount of water for each cup and the airtight seal used in the individual portions keeps the product fresh. Additional Information The company has three models of brewers that offer different features, such as the size of the water reservoir, the number of brewing sizes, and the types ofltering devices used in the machine. Data from the most recent scal year for the three models is shown below. Model Home Brewer Ofce Brewer European Deluxe Sales volume (units) 12,000 30,000 6,000 Unit selling price $150 $200 $300 Variable cost per unit 120 140 180 Contribution margin $30 $60 $120 per unit Fixed costs are $1,500,000 per year. The company has no work in process or nished goods inventories. The company is facing increased levels of competition from manufacturers using similar brewing technologies and believes there is no room or any increases in unit selling prices. Dark and Bold Inc. is unsure ofthe strategies to take in order to increase protability. The engagement partner would like the following questions on his desk by Monday morning: Calculate the company's overall break-even point in sales dollars. Calculate the sales dollars required for each product at the overall break-even level of sales calculated in (1) above. Calculate the companys overall break-even point in total units. What impact would doubling the number of Office Brewer units sold next year have on the overall break-even point in sales dollars? Assume that there will be no changes to the Home Brewer or European Deluxe unit sales, that unit selling prices and variable costs will remain the same for each model, and that total xed costs will be unchanged. 5'5\"!\"7
