Attica Candy Company is a wholesale distributor of candy. The company services grocery, con- venience, and drug stores in a large metropolitan area. Attica has achieved modest but steady growth in sales over the past few years, while candy prices have been increasing. The company is formulating its plans for the coming fiscal year. Following is the data used to project the current year's after-tax net income of $110,400. Average selling price 4.00 per box Average variable costs: Cost of candy Selling expenses 2.00 per box 0.40 per box 2.40 per box Annual fixed costs: $ 160,000 280,000 $ 440,000 Selling Administrative Expected annual sales volume (390,000 boxes) S1,560,000 Tax rate 40% Manufacturers of candy have announced they will increase prices of their products an aver- age of 15 percent in the coming year due to increases in raw materials (sugar, cocoa, peanuts, etc.) and labour costs. Attica Candy Company expects all other costs will remain at the same rates or levels as the current year. Required: 1. How was the $110,400 net income figure calculated? 2. What is Attica Candy Company's break-even in boxes of candy for the current year? 3. What selling price per box must Attica Candy Company charge to cover the 15 percent increase in the cost of candy and still maintain the current contribution margin ratio? 4. What volume of sales in dollars must Attica Candy Company achieve in the coming year to maintain the same net income after taxes as projected for the current year if the selling price of candy remains at $4 per box and the cost of candy increases 15 percent? 5. How many units would have to be sold next year to generate a net income equal to 10 per- cent of revenue?
Attica Candy Company is a wholesale distributor of candy. The company services grocery, con- venience, and drug stores in a large metropolitan area. Attica has achieved modest but steady growth in sales over the past few years, while candy prices have been increasing. The company is formulating its plans for the coming fiscal year. Following is the data used to project the current year's after-tax net income of $110,400. Average selling price 4.00 per box Average variable costs: Cost of candy Selling expenses 2.00 per box 0.40 per box 2.40 per box Annual fixed costs: $ 160,000 280,000 $ 440,000 Selling Administrative Expected annual sales volume (390,000 boxes) S1,560,000 Tax rate 40% Manufacturers of candy have announced they will increase prices of their products an aver- age of 15 percent in the coming year due to increases in raw materials (sugar, cocoa, peanuts, etc.) and labour costs. Attica Candy Company expects all other costs will remain at the same rates or levels as the current year. Required: 1. How was the $110,400 net income figure calculated? 2. What is Attica Candy Company's break-even in boxes of candy for the current year? 3. What selling price per box must Attica Candy Company charge to cover the 15 percent increase in the cost of candy and still maintain the current contribution margin ratio? 4. What volume of sales in dollars must Attica Candy Company achieve in the coming year to maintain the same net income after taxes as projected for the current year if the selling price of candy remains at $4 per box and the cost of candy increases 15 percent? 5. How many units would have to be sold next year to generate a net income equal to 10 per- cent of revenue?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:Attica Candy Company is a wholesale distributor of candy. The company services grocery, con-
venience, and drug stores in a large metropolitan area. Attica has achieved modest but steady
growth in sales over the past few years, while candy prices have been increasing. The company is
formulating its plans for the coming fiscal year. Following is the data used to project the current
year's after-tax net income of $110,400.
Average selling price
4.00 per box
Average variable costs:
Cost of candy
Selling expenses
2.00 per box
0.40 per box
2.40 per box
Annual fixed costs:
$ 160,000
280,000
$ 440,000
Selling
Administrative
Expected annual sales volume (390,000 boxes)
S1,560,000
Tax rate
40%
Manufacturers of candy have announced they will increase prices of their products an aver-
age of 15 percent in the coming year due to increases in raw materials (sugar, cocoa, peanuts,
etc.) and labour costs. Attica Candy Company expects all other costs will remain at the same
rates or levels as the current year.
Transcribed Image Text:Required:
1. How was the $110,400 net income figure calculated?
2. What is Attica Candy Company's break-even in boxes of candy for the current year?
3. What selling price per box must Attica Candy Company charge to cover the 15 percent
increase in the cost of candy and still maintain the current contribution margin ratio?
4. What volume of sales in dollars must Attica Candy Company achieve in the coming year to
maintain the same net income after taxes as projected for the current year if the selling price
of candy remains at $4 per box and the cost of candy increases 15 percent?
5. How many units would have to be sold next year to generate a net income equal to 10 per-
cent of revenue?
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