Connelly, Inc., a manufacturer of quality electric ice cream makers, has experienced a steady growth in sales over the past few years. Since her business has grown, Jan DeJaney, 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 per ice cream maker

Direct labor ............... $ 13.50

Direct materials .............. 14.50

Variable overhead .............. 6.00

Total variable costs ............. $ 34.00

Fixed costs

Manufacturing ............... $ 82,500

Selling .................. 42,000

Administrative .............. 356,000

Total fixed costs ..............$480,500

Selling price per unit ............. $ 65.00

Expected sales (units) ............ 30,000

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 35,000 ice cream makers which she thinks she can achieve by an additional fixed selling expense of $200,000 for advertising. All other costs remain as in requirement 1. What will be the operating profit if the additional $200,000 is spent on advertising and sales rise to 35,000 units?

4. What will be the new breakeven point if the additional $200,000 is spent on advertising?

5. If the additional $200,000 is spent for advertising in the next year, what is the required sales level in units to equal the current year’s income at 30,000 units?