Tanner Company's most recent contribution format income statement is presented below:

The company sells its only product for $15 per unit. There were no beginning or ending inventories.

Required:

a) Compute the company's break-even point in units sold.
b) Compute the total variable expenses at the break-even point.
c) How many units would have to be sold to earn a target operating income of $9,000?
d) The sales manager is convinced that a $6,000 increase in the advertising budget would increase total sales by $25,000. Would you advise the increased advertising outlay?

Question

Tanner Company's most recent contribution format income statement is presented below:

The company sells its only product for $15 per unit. There were no beginning or ending inventories.

Required:

a) Compute the company's break-even point in units sold.
b) Compute the total variable expenses at the break-even point.
c) How many units would have to be sold to earn a target operating income of $9,000?
d) The sales manager is convinced that a $6,000 increase in the advertising budget would increase total sales by $25,000. Would you advise the increased advertising outlay?

Quizplus · Accepted Answer

The Answer of Tanner Company's most recent contribution format income statement is presented below:

The company sells its only product for $15 per unit. There were no beginning or ending inventories.

Required:

a) Compute the company's break-even point in units sold.
b) Compute the total variable expenses at the break-even point.
c) How many units would have to be sold to earn a target operating income of $9,000?
d) The sales manager is convinced that a $6,000 increase in the advertising budget would increase total sales by $25,000. Would you advise the increased advertising outlay?

Tanner Company's Most Recent Contribution Format Income Statement Is Presented