Problem 1: Candyman Company is a wholesale distributor of candy. The company services grocery stores, convenience stores, and drug stores in Metro Manila. Small but steady growth in sales has been achieved by the company over the past few years while candy prices have been increasing. The company is preparing its plans for the coming fiscal year. Presented below are the data used to project the current year's after-tax net income of P1,104,000. Manufacturers of candy have announced that they will increase prices of their products at an average of 15% in the coming year due to increases in raw materials (sugar, cocoa, peanuts, etc.) and labor costs. Candyman Company expects that all other costs will remain at the same rates or levels as the current year. Candyman is subject to a 30% income tax rate. P40 per box Average selling price Average variable costs Cost of candy Selling expenses Annual fixed costs Selling expenses Administrative Expected annual sales volume 390,000 boxes P20 per box P4 per box P1,690,000 P2,800,000 P15,600,000 Required: 1. What is the break-even point in units before a 15% increase in prices? 2. If the current contribution margin ratio is maintained, what would be the selling price of the candy to cover the 15% increase in variable costs? 3. If candy costs increase 15% but the selling price remains at P40 per box, what will be the breakeven point in units? 4. If the candy costs remain constant but the selling price increases by 15%, what will be the breakeven point in peso sales? 5. If net income after taxes is to remain the same after the cost of candy increases but no increase in the sales price is made, how many boxes of candy must Candyman sell?

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