Q6. Chromatics, Inc., produces novelty nail polishes. Each bottle sells for $3.60. Variable unit costs...
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Q6. Chromatics, Inc., produces novelty nail polishes. Each bottle sells for $3.60. Variable unit costs are as follows: Acrylic base $0.75, Pigments 0.38 , Other ingredients 0.35 , Bottle, packing material 1.15 , Selling commission 0.25 . Fixed overhead costs are $12,000 per year. Fixed selling and administrative costs are $6,720 per year. Chromatics sold 35,000 bottles last year. Required: 1. What is the contribution margin per unit for a bottle of nail polish? What is the contribution margin ratio? 2. How many bottles must be sold to break even? What is the break-even sales revenue? 3. What was Chromatics's operating income last year? 4. What was the margin of safety? 5. Suppose that Chromatics, Inc., raises the price to $4.00 per bottle, but anticipated sales will drop to 30,400 bottles. What will the new break-even point in units be? Should Chromatics raise the price? Explain
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