partial credit,Problem 3-39 (alt1)

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T.J.

Brown

and Company, a manufacturer of quality handmade walnut bowls, has had a steady growth in sales for the past 5 years. However, increased competition has led Mr.

Brown,

the president, to believe that an aggressive marketing campaign will be necessary next year to maintain the company's present growth. To prepare for next year's marketing campaign, the company's controller has prepared and presented Mr.

Brown

with the following data for the current year,

2017:

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.Requirement 1. What is the projected net income for

2017?

Using the equation method, select the basic formula used to compute the target net income for

2017.

Revenues

-

Fixed costs

-

Variable costs

=

Target net income

/

1 Tax rate

The target net income for 2017 is $

87,780

.

Requirement 2. What is the breakeven point in units for

2017?

Determine the formula that is used to compute how many bowls are needed to break even, then compute the number of bowls needed. (Enter applicable values to the nearest cent, $X.XX.)

Fixed costs

/

Contribution margin per bowl

=

Bowls needed to break even

$184,800

/

$15.40

=

12,000

Requirement 3. Mr.

Brown

has set the revenue target for

2018

at a level of

$672,000

(or

24,000

bowls). He believes an additional marketing cost of

$33,880

for advertising in

2018,

with all other costs remaining constant, will be necessary to attain the revenue target. What is the net income for

2018

if the additional

$33,880

is spent and the revenue target is met?

The target net income for 2018 is $

90,552

.

Requirement 4. What is the breakeven point in revenues for

2018

if the additional

$33,880

is spent for advertising? (Do not round any of your calculations.)

The breakeven point in revenues for 2018 is $

397,600

.

Requirement 5. If the additional

$33,880

is spent, what are the required

2018

revenues for

2018

net income to equal

2017

net income?

Using the basic formula determined in requirement 1, compute the required number of units first, then the required revenue. (Do not round any of your calculations.)

The required number of units is

.