Anthony Industries developed the following income statement using a contribution margin approach:

ANTHONY INDUSTRIES

PROJECTED INCOME STATEMENT

FOR THE CURRENT YEAR ENDING 31 DECEMBER

Sales

$750,000

Less variable costs:

Variable manufacturing costs

$280,000

Variable selling costs

120,000

Total variable costs

400,000

Contribution margin

$350,000

Less fixed costs:

Fixed manufacturing costs

$130,000

Fixed selling and administrative costs

80,000

Total fixed costs

210,000

Operating income

$140,000

The projected income statement was based on sales of 100,000 units. Anthony Industries has the capacity to produce 120,000 units during the year.

Required:

A.

Determine the break-even point in units.

B.

The sales manager believes the company could increase sales by 8,000 units if advertising expenditures were increased by $22,000. Determine the effect on income if the company increases advertising expenditures.

C.

What is the maximum amount the company could pay for advertising if the advertising would increase sales by 8,000 units?