The Alpha Specialty, Inc. manufactures a product which sells for BD5. At present the company produces...

 

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The Alpha Specialty, Inc. manufactures a product which sells for BD5. At present the company produces and sells 50,000 units per year. Unit variable manufacturing and selling expenses are BD 2.50 and BD 0.50, respectively. Fixed costs are BD 70,000 for factory overhead and BD 30,000 for selling and administrative activities. The sales manager is proposing that the price be increased to BD 6. To maintain the present sales volume, advertising must be increased. The company's profit objective is 10 percent of sales. a. Calculate the additional expenditure the company can afford for advertising. [2 marks] b. Calculate the new break-even point in units and Bahraini Dinars, using BD 6 selling price and the additional outlay from part a. [2 marks) The Alpha Specialty, Inc. manufactures a product which sells for BD5. At present the company produces and sells 50,000 units per year. Unit variable manufacturing and selling expenses are BD 2.50 and BD 0.50, respectively. Fixed costs are BD 70,000 for factory overhead and BD 30,000 for selling and administrative activities. The sales manager is proposing that the price be increased to BD 6. To maintain the present sales volume, advertising must be increased. The company's profit objective is 10 percent of sales. a. Calculate the additional expenditure the company can afford for advertising. [2 marks] b. Calculate the new break-even point in units and Bahraini Dinars, using BD 6 selling price and the additional outlay from part a. [2 marks)

Answer rating: 100% (QA)

Contribution format Income statement Per unit 50000 units Per unit 50000 units Selling price 5 25000... View the full answer