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Part I Hopworks Brewing Company produces craft beer in Vancouver, BC. The Company has fixed expenses of $367,500 per year and variable expenses of $45
Part I Hopworks Brewing Company produces craft beer in Vancouver, BC. The Company has fixed expenses of $367,500 per year and variable expenses of $45 per keg. Each keg sells for $150. Required: 1. Compute the contribution margin per keg and the contribution margin ratio 2. Find the break-even point in kegs and in dollars using the contribution margin per unit and contribution margin ratio 3. Find the number of kegs Hopworks needs to sell to earn $52,500 of operating income 4. Find the number of kegs Hopworks needs to sell to earn net income of $44,100, assuming a tax rate of 25% Part II If budgeted/expected sales are 5,000 kegs, what are Hopworks' margin of safety and operating leverage? Part III If Hopworks can decrease its variable costs to $40 per keg by increasing its fixed costs to $385,000, how many kegs will it have to sell to generate $52,500 of operating income? Part IV Hopworks' sister company Mountain Cidery produces two types of organic cider - The Old English and Mountain Berry. Both ciders are sold in 1L bottle units. The unit information is as follows: The Old English cider is more popular, so Mountain Cidery sells three Old English bottles for every one Mountain Berry bottle. The fixed costs are $275,000. How many bottles of each cider does Mountain Cidery need to sell to break even
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