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Kipmar Company produces a molded briefcase that is distributed to luggage stores. The following operating data...

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Accounting

Kipmar Company produces a molded briefcase that is distributedto luggage stores. The following operating data for the currentyear has been accumulated for planning purposes.

Sales price$40.00
Variable cost of goods sold12.00
Variable selling expenses10.60
Variable administrative expenses3.00
Annual fixed expenses
   Overhead$7,800,000
   Selling expenses1,550,000
   Administrative expenses3,250,000


Kipmar can produce 1,500,000 cases a year. The projected net incomefor the coming year is expected to be $1,800,000. Kipmar is subjectto a 40% income tax rate.

During the planning sessions, Kipmar’s managers have been reviewingcosts and expenses. They estimate that the company’s variable costof goods sold will increase 15% in the coming year and that fixedadministrative expenses will increase by $150,000. All other costsand expenses are expected to remain the same.

What price would Kipmar need to charge for the briefcase in thecoming year to maintain the current year’s contribution marginratio?

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