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Delight Pastries sells premium chocolate bars for $155 per box. Total fixed expenses are $6,510 per...

Delight Pastries sells premium chocolate bars for $155 per box. Total fixed expenses are $6,510 per month and variable expenses involved in manufacturing this product are $62 per box. Monthly sales are 125 boxes. To earn full marks, show all computation and formulas used. Required: 1. Determine the number of chocolate boxes Delight Pastries must sell to breakeven (use equation method). 2. Assume Delight wants to earn a profit of $6,045: a) Determine the sales volume in units necessary to earn the desired profit. (use shortcut method) b) Determine the sales volume in dollars necessary to earn the desired profit. c) Using the contribution margin format, prepare an income statement to confirm your answers to parts a and b. 3. Determine the margin of safety in: a) units b) sales dollars c) Percentage

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Answer #1

Contribution Margin per unit = $155-62 = $93 per unit

1. Break even units = Fixed costs / Contribution Margin per unit
= $6510 / 93 = 70 units

2.
a. Units required to earn $6045 = (Fixed costs+Target Profit) / Contribution Margin per unit
= ($6510+6045) / 93 = 135 units

b. Sales Volume Dollars = 135 x $155 = $20925

c.

Sales $         20,925
Variable Costs $           8,370
Contribution Margin $        12,555
Fixed Costs $           6,510
Net Operating Income $           6,045

3.
a. Margin of Safety = Actual Sales - Break even sales
= 125 - 70 = 55 units

b. In dollars = 55 x $155 = $8525

c. In Percentage = 55 / 125 = 44%

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