Davis Devices makes an electronic bathroom scale that can connect to a smartphone and automatically record...
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Davis Devices makes an electronic bathroom scale that can connect to a smartphone and automatically record various measurements for tracking progress. Davis has experienced reasonable growth in the three years it has been selling the scale, where advertising was often by word of mouth and reviews left on online e-commerce sites. The Chief Marketing Officer (CMO) at Davis believes that a formal advertising campaign will be necessary to continue the current growth trend. To prepare for the campaign, the company's cost analyst has prepared and presented the following financial data for the current year, year 1: Variable costs: Direct labor (per unit) Direct materials (per unit) Variable overhead (per unit) Total variable costs (per unit) Fixed costs (annual): Manufacturing Selling Administrative Total fixed costs (annual) Selling price (per unit) Expected sales revenues, year 1 (35,000 units) Davis has an income tax rate of 22 percent. $ 15 7 3 $ 25 $ 92,600 75,000 160,000 $ 327,600 $ 60 $ 2,100,000 The CMO has set the sales target for year 2 at a level of $2,400,000 (or 40,000 units). The CMO believes that market conditions prevent any possible increase in price. Required: a. What is the projected after-tax operating profit for year 1? b. What is the break-even point in units for year 1? c. The CMO believes that attaining the sales target (40,000 units) will require additional selling expenses of $52,500 for advertising in year 2, with all other costs remaining constant. What will be the after-tax operating profit for year 2 if the firm spends the additional $52,500? d. What will be the break-even point in sales dollars for year 2 if the firm spends the additional $52,500 for advertising? Note: Solve by computing volume in units first. e. If the firm spends the additional $52,500 for advertising in year 2, what is the sales level in dollars required to equal the year 1 after- tax operating profit? Note: Solve by computing volume in units first. f. At a sales level of 40,000 units, what is the maximum amount the firm can spend on advertising to earn an after-tax operating profit of $717,522? Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Required E Required F What is the projected after-tax operating profit for year 1? After-tax operating profit < Required A Required B > Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Required E Required F What is the break-even point in units for year 1? Break-even point units < Required A Required C > Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Required E Required F The CMO believes that attaining the sales target (40,000 units) will require additional selling expenses of $52,500 for advertising in year 2, with all other costs remaining constant. What will be the after-tax operating profit for year 2 if the firm spends the additional $52,500? After-tax operating profit < Required B Required D > Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Required E Required F What will be the break-even point in sales dollars for year 2 if the firm spends the additional $52,500 for advertising? Note: Solve by computing volume in units first. Break-even in sales dollars < Required C Required E > Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Required E Required F If the firm spends the additional $52,500 for advertising in year 2, what is the sales level in dollars required to equal the year 1 after-tax operating profit? Note: Solve by computing volume in units first. Round up units to the nearest whole number and round your final answer to the nearest whole dollar amount. Sales level < Required D Required F > Show less Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Required E Required F At a sales level of 40,000 units, what is the maximum amount the firm can spend on advertising to earn an after-tax operating profit of $717,522? Maximum advertising costs < Required E Required F > Davis Devices makes an electronic bathroom scale that can connect to a smartphone and automatically record various measurements for tracking progress. Davis has experienced reasonable growth in the three years it has been selling the scale, where advertising was often by word of mouth and reviews left on online e-commerce sites. The Chief Marketing Officer (CMO) at Davis believes that a formal advertising campaign will be necessary to continue the current growth trend. To prepare for the campaign, the company's cost analyst has prepared and presented the following financial data for the current year, year 1: Variable costs: Direct labor (per unit) Direct materials (per unit) Variable overhead (per unit) Total variable costs (per unit) Fixed costs (annual): Manufacturing Selling Administrative Total fixed costs (annual) Selling price (per unit) Expected sales revenues, year 1 (35,000 units) Davis has an income tax rate of 22 percent. $ 15 7 3 $ 25 $ 92,600 75,000 160,000 $ 327,600 $ 60 $ 2,100,000 The CMO has set the sales target for year 2 at a level of $2,400,000 (or 40,000 units). The CMO believes that market conditions prevent any possible increase in price. Required: a. What is the projected after-tax operating profit for year 1? b. What is the break-even point in units for year 1? c. The CMO believes that attaining the sales target (40,000 units) will require additional selling expenses of $52,500 for advertising in year 2, with all other costs remaining constant. What will be the after-tax operating profit for year 2 if the firm spends the additional $52,500? d. What will be the break-even point in sales dollars for year 2 if the firm spends the additional $52,500 for advertising? Note: Solve by computing volume in units first. e. If the firm spends the additional $52,500 for advertising in year 2, what is the sales level in dollars required to equal the year 1 after- tax operating profit? Note: Solve by computing volume in units first. f. At a sales level of 40,000 units, what is the maximum amount the firm can spend on advertising to earn an after-tax operating profit of $717,522? Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Required E Required F What is the projected after-tax operating profit for year 1? After-tax operating profit < Required A Required B > Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Required E Required F What is the break-even point in units for year 1? Break-even point units < Required A Required C > Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Required E Required F The CMO believes that attaining the sales target (40,000 units) will require additional selling expenses of $52,500 for advertising in year 2, with all other costs remaining constant. What will be the after-tax operating profit for year 2 if the firm spends the additional $52,500? After-tax operating profit < Required B Required D > Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Required E Required F What will be the break-even point in sales dollars for year 2 if the firm spends the additional $52,500 for advertising? Note: Solve by computing volume in units first. Break-even in sales dollars < Required C Required E > Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Required E Required F If the firm spends the additional $52,500 for advertising in year 2, what is the sales level in dollars required to equal the year 1 after-tax operating profit? Note: Solve by computing volume in units first. Round up units to the nearest whole number and round your final answer to the nearest whole dollar amount. Sales level < Required D Required F > Show less Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Required E Required F At a sales level of 40,000 units, what is the maximum amount the firm can spend on advertising to earn an after-tax operating profit of $717,522? Maximum advertising costs < Required E Required F >
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Auditing A Practical Approach
ISBN: 9780730382645
4th Edition
Authors: Robyn Moroney, Fiona Campbell, Jane Hamilton
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