Exercise 15

Exercise 17

Exercise 19

Damian Wills and Company sells canisters of cinnamon-, peppermint- and mango-scented air fresheners. The company has annual fixed costs of $780 000. Last year, the company sold 15 000 canisters of its air fresheners in the ratio of 1:2:2. Wills' accounting department has compiled the following data related to the three air fresheners: Cinnamon Peppermint Mango $30.00 $34.00 $22.00 Price per canister Variable costs per canister 12.00 24.00 32.00 REQUIRED a Calculate the total number of canisters that must be sold for the company to break even. b Calculate the number of canisters of Cinnamon, Peppermint and Mango that must be sold to break even. How might Damian Wills and Company reduce its break- even point? Gosford Rocks Ltd mines and distributes sandstone. Most of the company's sandstone is sold to contractors who use the product when constructing luxury houses. Carly, company CEO, believes the company needs to advertise to increase sales. She has proposed a plan to the other managers that Gosford Rocks spend $300 000 on a targeted advertising campaign. The company currently sells 50 000 tonnes of sandstone for total revenue of $10000 000. Other data related to the company's production and operational costs follow: $3 000 000 400 000 Direct labour Variable production overhead Fixed production overhead Selling and administrative expenses: Variable 700 000 100 000 Fixed 600 000 REQUIRED a Compute the break-even point in units (i.e. tonnes) for Gosford Rocks. b Compute the contribution margin ratio for Gosford Rocks. If Carly decides to spend $300 000 on advertising and the company expects the advertising to increase sales by $600 000, should the company increase the advertising? Why or why not? Dev Hagen started his company, Proactive Electronic Signs, after graduating from university three years ago. While earning his engineering degree, Dev became intrigued by all of the electronic signs he saw around the city and he surprised his friends by starting the company. Dev is currently considering introducing a new custom electronic signage product that he believes will sell like hotcakes. In fact, he estimates the company will sell 14 000 of the signs. The signs are expected to sell for $150 and require variable costs of $50. Proactive Electronic Signs has annual fixed costs of $600 000. REQUIRED How many signs must the company sell to break even? b How many signs must be sold to earn a profit of $30 000? If 14 000 signs are sold, how much profit will Proactive Electronic Signs earn? d What would be the break-even point if the sales price decreased by 20 per cent? Round your answer to the next-highest number What would be the break-even point if variable costs per sign decreased by 40 per cent? f What would be the break-even point if fixed costs increased by $100000