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Draaksh Corporation sells premium quality wine for $135 per bottle. Its direct materials and direct...

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Accounting

Draaksh Corporation sells premium quality wine for $135 per bottle. Its direct materials and direct labour costs are $26 and $14.50 respectively per bottle. It pays its direct labour employees a wage of $29 per hour.

The company performed a regression analysis using the past 12 months data and established the following monthly cost equation for manufacturing overhead costs using direct labour-hours as the overhead allocation base:

y = $156,700 + $25.00x

Draaksh believes that the above cost estimates will not substantially change for the next fiscal year. Given the stiff competition in the wine market, Draaksh budgeted an amount of $35,400 per month for sales promotions; additionally, it has decided to offer a sales commission of $7.00 per bottle to its sales personnel. Administrative expenses are expected to be $25,700 per month.

- Compute the expected total variable cost per bottle, the expected contribution margin ratio, the annual break-even sales in units and dollars

- Draaksh has budgeted sales of $9.2 million for the next fiscal year. What is the companys margin of safety in dollars and as a percentage of budgeted sales?

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