Breakeven point, what-if analysis Air Peanut Company manufactures and sells roasted peanut packets to commercial airlines. Following are the price and cost data per 100 packets of peanuts:
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Estimated annual sales volume 11,535,700 packets
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Selling price
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$35.00
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Variable costs:
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Raw materials
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$16.00
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Direct labor
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7
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Manufacturing support
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4
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Selling expenses
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1.6
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Total variable costs per 100 packets
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$28.60
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Annual fixed costs:
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Manufacturing support
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$192,000
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Selling and administrative
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276,000
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Total fixed costs
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$468,000
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Required
(a) Determine Air Peanut's breakeven point in units.
(b) How many packets does Air Peanut have to sell to earn $156,000?
(c) Air Peanut expects its direct labor costs to increase by 5% next year. How many units will it have to sell next year to break even if the selling price remains unchanged?
(d) If Air Peanut's direct labor costs increase by 5%, what selling price per 100 packets must it charge to maintain the same contribution margin-to-sales ratio?