Problem
Candy Emporium is a new small business wanting to achieve financial success. In order to make wise decisions about the company, the owners will need to determine their breakeven point and planned net income.
Use the following information to calculate breakeven point and planned net income.
I. Candy Emporium has fixed expenses of $100,000 for the year. Its variable expenses average $3 per unit of product and its selling price average is $5 per unit. The result is an average contribution margin of $2 per unit. The margin ratio is 40%.
Breakeven point is calculated by dividing the fixed costs of production by the margin ratio.
What is the breakeven point for Candy Emporium?
II. Candy Emporium would also like to plan their net income for next year. They are predicting revenue to be $300,000. Their predicted cost is $175,000. net Income = total revenue - total expenses (costs)
What is the planned net income for Candy Emporium?