LS2473: A.S Candy Company is a wholesale distribution of candy. The company services grocery convenience, the drugstores in a large metropolitan area. Small but steady growth in the sales has been achieved by the company over the past few year while candy prices have been increasing. The company is formulating its plans for the coming fiscal year. Presented below are the data used to project the current year’s after-tax net income of Rs. 1,10,400.

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Question: A.S Candy Company is a wholesale distribution of candy. The company services grocery convenience, the drugstores in a large metropolitan area. Small but steady growth in the sales has been achieved by the company over the past few year while candy prices have been increasing. The company is formulating its plans for the coming fiscal year. Presented below are the data used to project the current year’s after-tax net income of Rs. 1,10,400.

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Manufacturer of candy have announced that they will increase prices of their products at an average of 15% in the coming year, owing to increase in raw material and labour costs. A .S. Candy Company expects that all other costs will remain at the same rates or levels as the current year.

Required:

(i)What is A.S. Candy Company’s break-even point in the boxes of candy, for the current year?

(ii)What selling price per box must A.S. Candy Company charge to cover the 15% increase in the cost of candy and still maintain contribution margin ratio?

 


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