A drive in movie theater has been selling popcorn, and the small concession stand has normally reported a monthly profit of $18,000 on sales of $48,000, fixed costs are currently about  $18,000, and variable costs of $0.80 per popcorn order. Next year, the company plans to start selling pretzels for $4 each. Pretzels will have a variable cost of $0.92 and new equipment and personnel to produce nachos will increase monthly fixed costs by $7,288.80. Initial sales of pretzels should total 3,000 units per month. Determine the monthly break-even sales during the first month of pretzel sales, assuming a constant sales mix of 1 unit of pretzels and 3 units of popcorn.

Mary Willis is the advertising manager for Bargain Shoe Store. She is currently working on a major promotional campaign. Her ideas include the installation of a new lighting system and increased display space that will add $19,000 in fixed costs to the $128,000 currently spent. In addition, Mary is proposing that a 5% price decrease ($20 to $19) will produce a 20% increase in sales volume (20,000 to 24,000). Variable costs will remain at $12 per pair of shoes. Management is impressed with Mary’s ideas but concerned about the effects that these changes will have on the break-even point and the margin of safety.

FDC has decided to offer Unicorn Cookies. We paid a non-refundable, $120,000 for a marketing survey to help us understand food trends prior to settling in on Unicorn as the next new cookie option. FDC thinks that the new cookie will generate $300,000 in incremental revenue in year 1 year and revenue will grow at 6%. Fixed costs will be $15,000 per year, and variable costs will be approximately 20% of sales (lots of food coloring). The capital investment in the equipment needed to produce the new cookies will cost $200,000 and will be depreciated in a straight-line manner for the 4 years of the cookie's life (if you think unicorn will really last that long). The change in net working capital will be the following, year zero= 10k increase (stocking up on the ingredients, etc), year 1= 20k increase (really ramping up), year 2= 5k decease (beginning to get paid), year 3 = 10k decrease, year 4 = 15k decrease. The firm has a tax rate of 21%. The required rate of return on projects with…

Gushers Company produces 1000 packages of fruit snacks per month. The sales price is $5 per pack. Variable cost is $1.60 per unit, and fixed costs are $1800 per month. Management is considering adding a vitamin supplement to improve the value of the product. The variable cost will increase from $1.60 to $1.90 per unit, and fixed costs will increase by 10%. At what sales price for the new product will the two alternatives (sell as is or process further) produce the same operating income? (Round your answer to the nearest cent.) O $5.48 O $5.00 O $3.88 O $1.60 < Previous Next ►