Cost Management 6th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins

تمرين 18

Profit Planning Connelly, Inc., a manufacturer of quality electric ice cream makers, has experienced a steady growth in sales over the past few years. Since her business has grown, Jan DeJaney, the president, believes she needs an aggressive advertising campaign next year to maintain the company's growth. To prepare for the growth, the accountant prepared the following data for the current year:


Required
1. If the costs and sales price remain the same, what is the projected operating profit for the coming year
2. What is the breakeven point in units for the coming year
3. Jan has set the sales target for 35,000 ice cream makers, which she thinks she can achieve by an additional fixed selling expense of $200,000 for advertising. All other costs remain as in requirement 1. What will be the operating profit if the additional $200,000 is spent on advertising and sales rise to 35,000 units
4. What will be the new breakeven point if the additional $200,000 is spent on advertising (Prepare a contribution income statement to support your answer.) What is the percentage change in both fixed costs and in the breakeven point What general point is illustrated by this comparison
5. If the additional $200,000 is spent for advertising in the next year, what is the sales level (in units) needed to equal the current year's income at 30,000 units