Stanson Candy Bars
Stanson Company makes and distributes a coconut/chocolate/taffy/tapioca candy bar which tastes so good
that eating the candy bar is commonly known as culminating in an emotional experience. The candy bar is sold
for 80 cents to retailers. For the year 2022, management estimates the following revenues and costs.
Sales				$ 2,200,000		Selling expenses, variable				$ 137,500
Direct materials, variable				550,000		Selling expenses, fixed				110,000
Direct labor, variable				412,500		Administrative expenses, variable				27,500
Manufacturing overhead, variable				440,000		Administrative expenses, fixed				50,000
Manufacturing overhead, fixed				260,000
a) Please prepare a contribution format income statement based on management's estimates.
answer with a contribution format income statement.
c) Stanson is considering using an extra-rich taffy in their candy bars. This will increase direct materials cost to $0.22
and variable overhead to $0.17, and fixed overhead to $300,000. They hope this will result in a 10% increase in
the number of candy bars sold. Should they adopt this? Make your comparison with management's original
estimates.
d) Stanson would like to increase its net income to $500,000. To do so, they are considering an increase in
selling and advertising. Specifically their increases will result in a $.03 increase in variable selling cost
and $130,000 increase in fixed selling cost for increased advertisements. How many candy bars will need
to be sold, given these changes, ro arrive at a $500,000 net income? Base your analysis on management's original
estimates.
e) Stanson is considering slightly decreasing the size of their candy bars. This will result in a $.02 reduction
in variable direct materials cost, a $.01 reduction in variable overhead cost, and a $10,000 decrease in
fixed overhead costs. However, they anticipate that this will reduce sales volume by 15%. Should this change
be adopted? Base your analysis on management's original estimates.