Question

Feeling ignored by Campbell's Chunky soup, Cam Newton teamed up with the Duchess of Cornwall Camilla Parker Bowles to start his own soup company Cam Bowles Soup Company. The company has found success from products such as New Eatin Cam Chowder soup, Chicken and Dablings soup, and a black hard plastic spoon named "The Souperman Spoon". The polishing cost to shine the spoons is a mixed cost. The following data was taken Units Total polishing cost 48,000 $144,804 60,000 $168,204 84,000 $204,204

Please help me with the steps to obtain the correct answers, Thank you

Answer 1

Solution 1) Calculation of Break Even Point in spoons sold:

Selling Price per unit = $30

Contribution Margin

= (Selling Price per unit – Variable Cost per unit) / Selling price per unit x 100

29% = (30 – Variable Cost per unit) / 30 x 100

Therefore, Variable Cost per unit = $21.30 and Contribution per unit = $8.70

Break Even Point in spoons sold = Total Fixed Cost / Contribution per unit

                                                       = $,1365,900 / $8.70 = 157,000 spoons

Correct option is Option D: 157,000 spoons

Solution 2) Calculation of Break Even Point in spoons sold if the selling price per unit is increased by 11%.

New Selling Price per unit = $30 + 11% = $33.30

New Contribution per unit = $33.30 - $21.30 = $12.00

Break Even Point in spoons sold = Total Fixed Cost / Contribution per unit

                                                       = $,1365,900 / $12.00 = 113,825 spoons     

Correct option is Option B: 113,825 spoons

Solution 3) Calculation of numbers of spoons to be sold at $33.80 to earn a profit of $1,000,000

New Contribution per unit = $33.80 - $21.30 = $12.50

Required Units to be sold = (Fixed Cost + Desired Profit) / Contribution per unit

                                            = ($,1365,900 + $1,000,000) / $12.50

                                            = 189,272 spoons

Note: As the Depreciation amount is not available required units are calculated ignoring the depreciation cost. If the depreciation amount is to be considered than this amount should be added to the fixed cost. Rest of the calculation will be the same.