Question

6. (EA9.) LO 3.3Brahma Industries sells vinyl replacement windows to home improvement retailers nationwide. The national sales manager believes that if they invest an additional $25,000 in advertising, they would increase sales volume by 10,000 units. Prepare a forecasted contribution margin income statement for Brahma if they incur the additional advertising costs, using this information: Sales (6,500 units at $115) Variable costs (6,500 units at $69) Contribution margin Fixed costs Net income (loss) $747,500 448,500 299,000 19,500 279,500

Answer 1

Forecasted Contribution Margin Income Statement Sales $ 1,897,500 (16,500 units * $ 115) Variable Costs $ 1,138,500 (16,500 units * $ 69) Contribution Margin $ 759,000 Fixed Costs $ 44,500 (refer workings below) Net Income (Loss) $ 714,500 Revised Fixed costs Fixed costs existing Additional advertising cost Revised Fixed costs $ $ $ 19,500 25,000 44,500