Please show work

Your company is a wholesaler of Mars candies. You are responsible for the M&M product line.

Mars has given you some pricing forecast data concerning 2020 product prices and payment

terms. You need determine the break-even points for your facility based on the information

detailed below.

Plain M&M Analysis: Mars has indicated the following 2020 price points and payment terms

on cases of Plain M&M candies

Payment Net 120 days of 48-count 1.74 oz bags will have a cost of $15.91 per case

Payment Net 90 days of 48-count 1.74 oz bags will have a cost of $15.65 per case

Payment Net 60 days of 48-count 1.74 oz bags will have a cost of $15.00 per case

Payment Net 30 days of 48-count 1.74 oz bags will have a cost of $14.91 per case

Payment Cash on Order of 48-count 1.74 oz bags will have a cost of $14.75 per case

Your additional costs are below:

Fixed costs for your warehouse are $4,500,000 annually

The selling price per case is $32.99

Labor costs (variable) for the warehouse are $5.67 per case

Marketing costs (variable) for the candy are $2.00 per case

Part #1: You need to analyze the break-even point for each of the listed payment terms

(***Hint-You will need five break-even points calculated). Determine the payment term option

that results in the lowest break-even point based on either the number of cases or dollars

(***Hint it should be the same price point option for both the number of cases and dollars)

2

Part #2: The market has changed. Your VP of sales indicates that the market will support a

$35.00 per case selling price. To accomplish this, however, marketing costs will need to be

increased by 25% at every payment term. You need to analyze the break-even point for each of

the listed payment terms with this new information.

Part #1:

The break-even points in units and dollars for each of the five payment terms

An indication of which of the payment terms results in the lowest break-even point

A break-even graph for the lowest break-even point option.

Part #2:

The break-even points in units and dollars for each of the five payment terms taking into

consideration the new case selling price and the 25% marketing cost increase

Your VP of Finance now indicates that due to the current cash flows, the company needs to pick the Payment Net 30 option. At what exact case selling price (in dollars and cents) would the Payment Net 30 option provide the lowest break-even point (by one or more cases)? Use the new marketing variable costs from Part #2 of the assignment. (You must provide your calculations to earn partial extra credit).