XYZ Company Projected Income Statement For the Current Year Ending December 31 S
ID: 2330287 • Letter: X
Question
XYZ Company
Projected Income Statement
For the Current Year Ending December 31
Sales (13,000 units)
$325,000
Less variable costs:
Variable manufacturing costs
$78,000
Variable selling costs
45,500
Total variable costs
123.500
Contribution margin
$201,500
Less fixed costs:
Fixed manufacturing costs
$91,000
Fixed selling and administrative costs
40,000
Total fixed costs
131,000
Operating income
$ 70,500
Required:
A.
Determine the break-even point in sales dollars.
B.
The sales manager believed the company could increase sales by 1,200 units if advertising expenditures were increased by $10,000. By how much will operating income increase or decrease if the advertising is increased as suggested?
C.
What is the maximum amount the company could pay for advertising if the advertising would increase sales by 1,200 units (income would not change)?
XYZ Company
Projected Income Statement
For the Current Year Ending December 31
Sales (13,000 units)
$325,000
Less variable costs:
Variable manufacturing costs
$78,000
Variable selling costs
45,500
Total variable costs
123.500
Contribution margin
$201,500
Less fixed costs:
Fixed manufacturing costs
$91,000
Fixed selling and administrative costs
40,000
Total fixed costs
131,000
Operating income
$ 70,500
Explanation / Answer
a) Breakeven Point in $ :-
= Total Fixed Cost / PV Ratio
= $131000 / 0.62
= $211290
PV Ratio = Contribution / Sales
= $201500 / $325000
= 0.62
b)
c)
Maximum Amount of Advertising :-
= $149600 - $131000
= $18600
Particulars Amount($) Sales (14200 Units) 355000 Less : Variable Cost ($355000*38%) (134900) Contribution 220100 Less : Fixed Cost ($131000+$10000) (141000) Net Income 79100Related Questions
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