uiz >> 18 Herschel Candy Company produces a single product a chocolate almond bar that sells for $0.70 per bar. The variable costs for each bar (sugar, chocolate, almonds, wrapper, and labor) total $0.50. The total monthly fixed costs are $50,000. Last month, bar sales reached 1.8 million. However, the president of Herschel Candy Company was not satisfied with its performance and is considering the following options to increase the company's profitability 1. Increase advertising. 2. Increase the quality of the bar's ingredients and simultaneously increase the selling price. 3. Increase the selling price with no change in ingredients Read the requirements Requirements Requirements (a) The sales manager is confident that an intensive advertising campaign will double sales volume. If the company president's goal is to increase this month's profits by 50% over last month's, what is the maximum amount that can be spent on advertising that doubles sales volume? (b) Assume that the company increases the quality of its ingredients, thus increasing variable costs to $0.60 per bar. By how much must the selling price per unit be increased to maintain the same breakeven point in units? (c) Assume next that the company has decided to increase its selling price to 0.80 per bar with no change in advertising or ingredients. Compute the sales volume in units that would be needed at the new price for the company to earn the same profit as it eamed last month.. plume. If the company president's goal is to increase the doubles sales volume? month. (Abbreviations used: CM Contribution margir Profit en en Ohr THE SEAS TOP 50.70 per bar. The variable costs for each bar (sugar, chocolate. Requirement (a) The sales manager is confident that an intensive advertising campaign will double sales volume. If the company president's goal is to increase this month's profits by 50% over last month's, what is the maximum amount that can be spent on advertising that doubles sales volume? Enter the formula you will use to solve for maximum amount that can be spent on advertising in the current month. (Abbreviations used: CM Contribution margin, SP Sales price, VC Variable costs) 15 of 15 questions (SP per unit x Units) (VC per unit x Units) (Fixed costs + Advertising) Profit Now calculate the amount that can be spent on advertising by solving for the unknown advertising costs. The maximum amount that can be spent on advertising is $ Requirement (b) Assume that the company increases the quality of its ingredients, thus increasing variable costs to $0.60 per bar. By how much must the selling price per unit be increased to maintain the same breakeven point in units? Begin by calculating the breakeven point with the original variable costs. First enter the formula, then calculate the breakeven point Total fixed costs 50,000 7 Contribution margin per unit 0.20 = Breakeven units 250,000 Now enter the formula to compute profit in this scenario. (Abbreviations used: CM Contribution margin, SP Sales price, VC Variable costs) (SP per unit x Units) (VC per unit x Units) Fixed costs Nina enlue for the uninnum eallinn nrina ner init that will maintain the eama hraaravan nnint = Profit Next 0 of 17 queston ine maximum amount that can be spent on advertising CITEM s for each bar (sugar, chocolate 15 of 15 questions Requirement (b) Assume that the company increases the quality of its ingredients, thus increasing variable costs to $0.60 per bar. By how much must the selling price per unit be increased to maintain the same breakeven point in units? Begin by calculating the breakeven point with the original variable costs. First enter the formula, then calculate the breakeven point Total fixed costs 50,000 Contribution margin per unit 0.20 Breakeven units 250,000 Now enter the formula to compute profit in this scenario. (Abbreviations used: CM Contribution margin, SP-Sales price, VC Variable costs) (SP per unit x Units) (VC per unit x Units) Fixed costs Now solve for the unknown selling price per unit that will maintain the same breakeven point. The selling price per unit to maintain the same breakeven point is $ Profit Requirement (c) Assume next that the company has decided to increase its selling price to 0.80 per barith no change in advertising or ingredients. Compute the sales volume in units that would be needed at the new price for the company to eam the same profit as it earned last month First enter the formula to calculate the sales volume needed (required units), then calculate the required units. Target profit Total fixed costs Contribution margin per unit Required units " Next 0 of 17 questions