Draaksh Corporation sells premium quality wine for $85 per bottle. Its direct materials and direct labour costs are $16 and $9.50 respectively per bottle. It pays its direct labour employees a wage of $19 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 = $151,700 + $20.00x
Draaksh budgeted an amount of $33,400 per month for sales promotions; additionally, it has decided to offer a sales commission of $4.50 per bottle to its sales personnel. Administrative expenses are expected to be $24,700 per month.
Required :"1 . Compute the expected total variable cost per bottle and the expected contribution margin ratio.Total variable costContribution margin ratio%02. Compute the annual break- even sales in units and dollars . ( Round your intermediate and finalanswers to the whole number . )Annual breakeven sales in unitsAnnual breakeven sales in dollars3 . Draaksh has budgeted sales of $8 . 2 million for the next fiscal year . What is the company’s margin ofsafety in dollars and as a percentage of budgeted sales ? ( Round your intermediate and final answersto the whole number . )Margin of safetyBudgeted sales
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