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Assume it is still December, and the budget process for next year is still underway.

Shown below is last year's information relating to one unit $($i$.$e$.,$ one box of chocolates$)$ produced and sold by Sweetwater Candy Company:

Unit selling price $$25\mathrm{.}00$

Variable cost per unit $$12\mathrm{.}92$

Sweetwater's annual fixed costs: $$110,400$

Required:

$($A$.)$ Calculate Sweetwater's annual break$-$even point last year in dollar sales and in number of units sold.

$($B$.)$ Based on last year's annual sales of $18,000$ units, determine Sweetwater's annual operating income..

$($C$.)$ Prepare a cost$-$volume$-$profit chart $($i$.$e$.,$ graph$)$ for sales between $0$ and $20,000$ units in increments of $2,000$ using last year's figures. The current manufacturing facilty has a maximum capacity of producing $20,000$ units per year.

$($D$.)$ Management has set a goal for next year of achieving an annual operating income of $$200,000.$ Based on last year's sales price, variable costs, and fixed costs, calculate the dollar amount and number of units of annual sales required for Sweetwater to earn an annual operating income of $$200,000.$

$($E$.)$ "The company is considering an expansion that will increase annual fixed costs by $10\%$ and increase variable costs by $15\%.$ The expansion will double production capacity to $40,000$ units per year, and management estimates sales of $25,000$ units next year. Assuming the sales price remains at $$25$ per unit and the expansion is implemented:

$$ calculate breakeven point in units and in dollars

$$ calculate operating income

$$ prepare a new cost$-$volume$-$profit chart $($i$.$e$.,$ graph$)$ for sales between

$0$ and $40,000$ units in increments of $4,000$ using the revised

figures. $"$

$($F$.)$ To be able to produce the budgeted sales volume of $25,000$ units next year, management has decided to go ahead with the expansion plans. The expansion will begin in January and should only take about $8$ weeks to complete. Is the expansion a good idea? Explain.

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