Assume a company purchases honeycombs from beekeepers for $2.00 a pound. The honey can be sold in raw form for $3,20 a pound or it can be used to make honey drop candies. Each package of candies contains three-quarters of a pound of honey and can be sold for $4.40 In addition to the cost of the honey, making and selling each container of candies incurs additional variable costs of $1.10 per unit. The monthly fixed costs associated with making the candies include: Master candy-maker's salary Depreciation of candy-making equipment Salary of salesperson dedicated to this product Total fixed costs $ 3,796 400 2,000 $ 6,196 The candy-making equipment does not wear out through use and it has no resale value. How many containers of candy does the company need to sell each month to exactly offset the avoidable fixed costs incurred to product and sell the candies?
Assume a company purchases honeycombs from beekeepers for $2.00 a pound. The honey can be sold in raw form for $3,20 a pound or it can be used to make honey drop candies. Each package of candies contains three-quarters of a pound of honey and can be sold for $4.40 In addition to the cost of the honey, making and selling each container of candies incurs additional variable costs of $1.10 per unit. The monthly fixed costs associated with making the candies include: Master candy-maker's salary Depreciation of candy-making equipment Salary of salesperson dedicated to this product Total fixed costs $ 3,796 400 2,000 $ 6,196 The candy-making equipment does not wear out through use and it has no resale value. How many containers of candy does the company need to sell each month to exactly offset the avoidable fixed costs incurred to product and sell the candies?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Vaibh
Transcribed Image Text:Assume a company purchases honeycombs from beekeepers for $2.00 a pound. The honey can be sold in raw form for $3.20 a pound or it
can be used to make honey drop candies. Each package of candies contains three-quarters of a pound of honey and can be sold for $4.40.
In addition to the cost of the honey, making and selling each container of candies incurs additional variable costs of $1.10 per unit.
The monthly fixed costs associated with making the candies include:
Master candy-maker's salary
Depreciation of candy-making equipment
Salary of salesperson dedicated to this product
Total fixed costs
$ 3,796
400
2,000
$ 6,196
The candy-making equipment does not wear out through use and it has no resale value. How many containers of candy does the company
need to sell each month to exactly offset the avoidable fixed costs incurred to product and sell the candies?
Transcribed Image Text:Total fixed costs
The candy-making equipment does not wear out through use and it has no resale value. How many containers of candy does the company
need to sell each month to exactly offset the avoidable fixed costs incurred to product and sell the candles?
Multiple Choice
6,679
6,440
6,885
$ 6,196
6,350
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