RT. Hernandez Company, maker of high-quality flashlights, has experienced steady growth over the last six years...

 

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RT. Hernandez Company, maker of high-quality flashlights, has experienced steady growth over the last six years However, increased competition has led Mr. Hernandez, the president, to believe that an aggressive campaign ia needed next year to maintain the company's present growth. The company' accountant has presented Mr. Hernander with the following data for the current year, 2016, for use in preparing next year's advertising campalgn. COST SCHEDULES Variable costs Direct labour per flashlight Direct materials Variable overhead Variable cost per tflashlight AR390 8.00 4.00 3.00 15.00 Fixed costs Manufacturing Selling Administrative Total fixed costs $ 25,000 40,000 70,000 $135,000 Selling price per flashlight Expected sales, 2017420,000 flashlights) $ 25.00 $500,000 Mr. Hernandez has set the sales target for the year 2017 at $550,000 (22,000 flashlights). Instructions (Ignore any income tax considerations.) (a) What is the projected operating income for 201 (b) What is the contribution margin per unit for 201 (c) What is the break-even point in units for 2012 (d) Mr. Hernandez believes that to attain the sales target in the year 2017, the company must incur an additional selling expense of $10,000 for advertising in 2017, with all other costs remaining constant. What will be the break- even point in sales dollars for 2017 if the company spends the additional $10,000? (e) If the company spends the additional $10,000 for advertising in 2017, what is the sales level in dollars required to equal 2016 operating income? RT. Hernandez Company, maker of high-quality flashlights, has experienced steady growth over the last six years However, increased competition has led Mr. Hernandez, the president, to believe that an aggressive campaign ia needed next year to maintain the company's present growth. The company' accountant has presented Mr. Hernander with the following data for the current year, 2016, for use in preparing next year's advertising campalgn. COST SCHEDULES Variable costs Direct labour per flashlight Direct materials Variable overhead Variable cost per tflashlight AR390 8.00 4.00 3.00 15.00 Fixed costs Manufacturing Selling Administrative Total fixed costs $ 25,000 40,000 70,000 $135,000 Selling price per flashlight Expected sales, 2017420,000 flashlights) $ 25.00 $500,000 Mr. Hernandez has set the sales target for the year 2017 at $550,000 (22,000 flashlights). Instructions (Ignore any income tax considerations.) (a) What is the projected operating income for 201 (b) What is the contribution margin per unit for 201 (c) What is the break-even point in units for 2012 (d) Mr. Hernandez believes that to attain the sales target in the year 2017, the company must incur an additional selling expense of $10,000 for advertising in 2017, with all other costs remaining constant. What will be the break- even point in sales dollars for 2017 if the company spends the additional $10,000? (e) If the company spends the additional $10,000 for advertising in 2017, what is the sales level in dollars required to equal 2016 operating income?

Answer rating: 100% (QA)

Contribution Margin Income Statement a Sales revenue Less Variable costs Direct mater... View the full answer