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The following information for 2019 for Pennys Cream Puffs is available:

Baking capacity 30,000 boxes of cream puffs

Boxes sold in year 18,000

Sales $270,000

Variable costs 117,000

Contribution margin $153,000

Fixed costs

Manufacturing 30,000

Selling 37,500

Administration 15,000

Income before taxes $70,500

Income taxes @ 20% 14,100

Net income $ 56,400

Instructions: Consider each of the following scenarios independently:

a. Calculate the break-even volume in boxes for the year.

b. If Penny expects to sell 21,000 boxes of cream puffs next year, calculate the expected after tax income, assuming costs and prices remain the same.

c. How many boxes of cream puffs must Penny sell to make an after tax net income of $104,000? (Round your answer to an even number)

d. Pennys cousin says she can sell cream puffs to a coffee shop in a nearby city but will require Penny to pay $20,000 to advertise the product. In addition, Penny will have to pay his cousin $3 for each box sold. Calculate the number of boxes that will have to be sold to maintain her after tax net income of $56,400. (Round your answer to an even number)

e. Penny wants to ramp up production by investing in a new machine that will cost $16,500. The benefit will be that variable costs will decrease by $2.5 per box. Calculate the new break even if the new machine is purchased.

f Assume instead that Penny does not purchase the machine or begin selling in the new city. She is worried that per box selling prices will decline by 10% and variable costs will increase by $4 per box. Calculate the sales volume in dollars needed if Penny is to maintain her after tax income of $56,400.

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