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Air Peanut Company - Managerial Accounting

Air Peanut Company manufactures and sells roasted peanuts packets to commercial airlines. Following are the price and cost data per 100 packets of peanuts:

Estimated annual sales volume = 11,535,700 packets

Selling price $35.00
Variable costs:
Raw materials $16.00
Direct labor 7.00
Manufacturing support 4.00
Selling expenses 1.60
Total variable costs per 100 pkts $28.60
Annual fixed costs:
Manufacturing support $192,000
Selling and administrative 276,000
Total fixed costs $468,000

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 contributions margin to sales ratio?

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Solution Preview

A = 7,312,000 units
B = 9,750,000 units
C = 7,735,537 units
D = ...

Solution Summary

The solution computes breakeven points, margin of safety for Air Peanut Company in different scenarios in excel file.