Fox Company developed the following income statement using a contribution margin

Question

Fox Company developed the following income statement using a contribution margin approach. FOX COMPANY PROJECTED INCOME STATEMENT FOR THE YEAR ENDING DECEMBER 31, 2004 Revenues $400,000 Variable Costs: 530.24 Variable manufacturing costs $100,000 Variable selling costs 60,000 Total Variable Costs 160,000 Contribution Margin $240,000 Fixed Costs: Fixed manufacturing costs $110,000 Fixed selling and administrative costs 70,000 Total Fixed Costs 180,000 Income $ 60,000 ========== The projected income statement was based upon sales of 20,000 units. Fox has the capacity to produce 25,000 units during the year. a. Determine breakeven point in units. b. The sales manager believes the company could increase sales by 3,000 units if advertising expenditures are increased by $30,000. Determine the effect on income if the company increases advertising expenditures.

Explanation / Answer

it increases the income.

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