Question

Practice questions I need to learn the full steps on working out the problems. Please help!

2. A company sells 200,000 products at a sales price of $2.70, and variable cost of $1.50 per product. Their fixed costs typically run $80,000. If they run a new ad campaign costing $11,000 during the Super Bowl, they expect to increase sales by 20%. What is the expected change in profits as a result of this potential ad campaign? 3. A company sells 260,000 products at a sales price of $3.12 and variable cost of $1.15 per bag. Their fixed costs typically run $75,000. If they run a new ad campaign costing $11,000 during the Super Bowl, they expect to increase sales by 20%. What is the expected total variable costs as a result of this potential ad campaign? 4. A company sells 210,000 products at a sales price of $5.20 and variable cost of $2.12 per product. Their fixed costs typically run $52,000. If they run a new ad campaign costing $11,000 each year, they expect to increase sales by 20%. What is the expected new breakeven level after the ad campaign is implemented?

Answer 1

2
		PU	Total	Revised Plan	Increase in Profit
	Sales	2.70	540,000	648,000
	Less: Variable Cost	1.50	300,000	360,000
	Contribution Margin	1.20	240,000	288,000
	Less: Fixed Cost		80,000	91,000
	Net Operating Income		160,000	197,000	37,000
3		PU	Total	Revised Plan	Increase
	Sales	3.12	811,200	973,440
	Less: Variable Cost	1.15	299,000	358,800	59,800
	Contribution Margin	1.97	512,200	614,640
	Less: Fixed Cost		75,000	86,000
	Net Operating Income		437,200	528,640
4		PU	Total	Revised Plan
	Sales	5.20	1,092,000	1,310,400
	Less: Variable Cost	2.12	445,200	534,240
	Contribution Margin	3.08	646,800	776,160
	Less: Fixed Cost		52,000	63,000
	Net Operating Income		594,800	713,160
	Break Even Level		16,883	20,455
	(Fixed Cost/Contribution Margin)