Ivanhoe Candy Company is a wholesale distributor of candy. The company services grocers, convenience stores, and drugstores in a large metropolitan area. Ivanhoe Candy Company has achieved small but steady growth in sales over the past few years, but costs have also been increasing. The company is formulating its plans for the coming fiscal year. The following data were used to project the current years after-tax operating income of $349,056:

The expected annual sales volume (842,400 boxes) is $6,739,200 and the tax rate is 40%. Candy manufacturers have announced that they will increase the prices of their products by an average of 15% in the coming year because of increases in raw material (sugar, cocoa, peanuts, and so on) and labour costs. Ivanhoe Candy Company expects that all other costs will remain at the same rates or levels as during the current year.

a. Calculate Ivanhoe Candy Companys break-even point in boxes of candy for the current year.

b. What selling price per box must Doyles Candy Company change to cover the 15 percent increase in variable production costs of candy. And still maintain the current contribution margin percentage?

c. What volume of sales in dollars must Doyles Candy Company achieve in the coming year to maintain the same net income after taxes as projected for the current year if the selling price of candy remains at $9.60 per box and the variable production costs of candy increase 15 percent?

$8.00 per box Average selling price Average variable costs Cost of candy Selling expenses Total $4.00 per box 0.80 per box $4.80 per box Annual fixed costs Selling Administrative Total $345,600 486,000 $831,600