Question

A.S. Marx and​ Company, a manufacturer of quality handmade walnut​ bowls, has had a steady growth in sales for the past 5 years.​ However, increased competition has led Mr. ​, the​ president, to believe that an aggressive marketing campaign will be necessary next year to maintain the​ company's present growth. To prepare for next​ year's marketing​ campaign, the​ company's controller has prepared and presented Mr. with the following data for the current​ year, What is the breakeven point in revenues for if the additional is spent for​ advertising? ​(Do not round any of your​ calculations.) The breakeven point in revenues for 2018 ?

Requirement 3. Mr. Marx has set the revenue target for 2018 at a level of $672,000 (or 24,000 bowls). He believes advertising in 2018, with all other costs remaining constant, will be necessary to attain the revenue target. What is th spent and the revenue target is met? The target net income for 2018 is $ 90,552 Requirement 4. What is the breakeven point in revenues for 2018 if the additional $33,880 is spent for advertising? The breakeven point in revenues for 2018 is $ 14200

Variable cost (per bowl)

Direct materials

$3.75

Direct manufacturing labor

7.00

Variable overhead (manufacturing, marketing, distribution and customer service)

1.85

Total variable cost per bowl

$12.60

Fixed costs

Manufacturing

$18,000

Marketing, distribution, and customer service

166,800

Total fixed costs

$184,800

Selling price

$28.00

Expected sales, 21,500 units

$602,000

Income tax rate 40%

Answer 1

Calculate Revenue, Net profit through Cost Sheet:

Paticulars	per unit	Total amount
direct Material            24000bowls	3.75	90,000
Direct manufacturing Labor     24000 bowls	7.00	168,000
variable Overheads    24000 bowls	1.85	44,400
Total variable Overhead 24000	12.60	302,400

Total Sale= 21500 * $28.00 = $602,000

Total Sale                                                                           602,000

less: variable Cost                                                             (302,400)

Contribution                                                                       299,600

less: Fixed Cost:

Manufacturing cost                                                          ( 18,000)

marketing, Distribution and Customer Service                    (166,800)

Profit                                                                                   114,800

Above profit is calculated through Current year for only your Understaning purpose.

Now the company wants to revenue of $672,000

Now see how to calculate This :

Computation of Net Income of 24000 Bowls

Particulars                                                           $

Revenue target                                                   672,000

less: Varibale cost                                             (302,400)

Contribution                                                       369,600

less Fixed Costs                                               (184,800)   

Additional Advertisement cost                           (33880)

Total Profit                                                         150920

Tax 40% of Total profit                                      (60,368)

Net Profit                                                         90,552

                                                  Calculation of Break even point

Formula of Break Even Points in units

Break even Point=    Fixed cost

                            Contribution per unit

                      fixed cost= $184800

Contribution per unit = selling price - Total variable cost

                             = 28.00- 12.60

                              = $15.40

so now by applying Break enen point formula= 184800/15.40

                                                             = 12000 bowls

If addtional Advertising cost is spending then Break even point= (184800+33880)/15.40

                                                                                         = 14200 bowls

if you want break even point in $ then units are multiplied by Selling Price per unit.

Let's see how to Calculate that:

Break even point in $ = Break even point * Selling price per unit

                               = 14200 * 28.00

                                = $ 397,600