Question

lomework Connelly Inc a manufacturer of quality electrice cream makers, has experienced a steady growth in sales over the past few years Because her business has grown, Jon De Janey, 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 Variable costs por ice crea Direct labor Direct materials Variable overhead Total variable costs 19. $ 43.00 550.000 $726,500 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 62.100 ice cream makers, which she thinks she can achieve by an additional fixed seng expense of 5247010 for advertising. All other costs remain as per the data in the above table. What will be the operating profit the additional $247010 is spent on advertising and les rise to 62 100 units? 4 a What will be the new breakeven point of the additional $247010 is spent on advertising? 46. Prepare a contribution income statement at the new breakeven point 4c What is the percentage change in both feed costs and in the breakeven point? 5. the additional $247010 is spent for advertising in the next year what is the sales level in units needed to equal the current year's operating profitat 57,500 units? Prev 10 5 Next > to search ER Trullillollell

Only need help with 4b.

Answer 1

break even units:

total fixed costs = (726,500+247,010) =>$973,510.

contribution per unit =$80 selling price - $43 variable costs

=>$37 per unit.

break even unit = $973,510 / $37.

=>26,311 units.

Contribution Income statement:

sales revenue (26,311 units*$80)		2,104,880
less: variable costs (26,311 units*$43)		(1,131,373)
contribution		973,507
fixed costs
original amount	726,500
incremental amount	247,010
total fixed costs		973,510
net income / (loss)		($3)

though the net income should be $0 at break even units, we are getting $3 loss due to rounding off of break even units to 26,311 units.