Connelly Incorporated, a manufacturer of quality electric ice-cream makers, has experienced a steady growth in sales over the past few years. Because 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	$ 25.00
Direct materials	30.50
Variable overhead	12.50
Total variable costs	$ 68.00
Fixed costs
Manufacturing	$ 107,000
Selling	67,000
Administrative	490,000
Total fixed costs	$ 664,000
Selling price per unit	$ 125
Expected sales (units)	61,500

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 65,200 ice cream makers, which she thinks she can achieve by an additional fixed selling expense of $255,640 for advertising. All other costs remain as per the data in the above table. What will be the operating profit if the additional $255,640 is spent on advertising and sales rise to65,200 units?

4-a. What will be the new breakeven point if the additional$255,640 is spent on advertising?

4-b. Prepare a contribution income statement at the new break even point.

4-c. What is the percentage change in both fixed costs and in the breakeven point?

5. If the additional $255,640 is spent for advertising in the next year, what is the sales level (in units) needed to equal the current year's operating profit at 61,500 units?

Answer rating: 100% (QA)

1 Statement Showing Operating Profit Sales Revenue 7687500 61500 125 Less Variable Cost Direct Mater... View the full answer