Question

Scott Confectionery sells its Stack-o-Choc candy bar for $0.60. The variable cost per unit for the...

Scott Confectionery sells its Stack-o-Choc candy bar for $0.60. The variable cost per unit for the candy bar is $0.34; total fixed costs are $171,000.

a. What is the contribution margin per unit for the Stack -O- Choc candy bar?

b. What is the contribution margin ratio for the Stack -O-Choc candy bar?

C. What is the breakdown point in units? In sales dollars?

D. If an increase in chocalate prices causes the variable cost per unit to increase to $0.55, what will happen to the breakeven point?

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Homework Answers

Answer #1

a.contribution margin =Sales-Variable cost

=(0.6-0.34)=$0.26

b.contribution margin  ratio=contribution margin /Sales

=(0.26/0.6)=43.33%(Approx)(or 0.433 approx).

c.Breakeven point=Fixed cost/contribution margin

=(171000/0.26)=657,692.31 units(Approx)

=Fixed cost/contribution margin ratio

=(171000/0.433)=$394,615.38(Approx)

d.New contribution margin =(0.6-0.55)=$0.05

Hence new breakeven=(171000/0.05)=3,420,000 units

Hence breakeven point increases or more units have to be sold to cover fixed and variable expenses of the company.

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