Trimex Corporation manufactures desk lamps. The following is information for next year's operations, based on an estimated volume of 20,000 units:
Expected revenues $1,000,000
Unit costs:
Direct materials $ 6.25
Direct labour 15.75
Variable overhead 5.50
Fixed manufacturing overhead 2.50
Total $30.00
Other fixed costs:
Administration, marketing, etc. $225,000
Income tax rate 30%
a)What is the breakeven point for next year?
b)What is next year's projected after-tax income?
c)Suppose the managers set a target after-tax income of $100,000. Estimate the number of units that must be sold.
d)Suppose the marketing department would like to spend $22,500 on a new promotion for this product. What minimum amount of new revenue should be generated from this expenditure to make it worthwhile?
e)Identify reasons why the managers cannot be certain that the new promotion would generate the amount of new revenue you calculated in part (d).
f)Using the above data what is the expected contribution margin for next year? What is the expected gross margin for next year? Why is it different than the expected contribution margin?

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The Answer of Trimex Corporation manufactures desk lamps. The following is information for next year's operations, based on an estimated volume of 20,000 units:
Expected revenues $1,000,000
Unit costs:
Direct materials $ 6.25
Direct labour 15.75
Variable overhead 5.50
Fixed manufacturing overhead 2.50
Total $30.00
Other fixed costs:
Administration, marketing, etc. $225,000
Income tax rate 30%
a)What is the breakeven point for next year?
b)What is next year's projected after-tax income?
c)Suppose the managers set a target after-tax income of $100,000. Estimate the number of units that must be sold.
d)Suppose the marketing department would like to spend $22,500 on a new promotion for this product. What minimum amount of new revenue should be generated from this expenditure to make it worthwhile?
e)Identify reasons why the managers cannot be certain that the new promotion would generate the amount of new revenue you calculated in part (d).
f)Using the above data what is the expected contribution margin for next year? What is the expected gross margin for next year? Why is it different than the expected contribution margin?

Trimex Corporation Manufactures Desk Lamps