Question 34 (a) (b) (c) Question 34 Martin Footwear Co. produces high-quality sh

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Question 34

(a)

(b)

(c)

Question 34

Martin Footwear Co. produces high-quality shoes. To prepare for next year’s marketing campaign, the company’s controller has prepared the following information for the current year, 2016:
Variable costs (per pair of shoes) Direct materials $42.00 Direct manufacturing labour 18.00 Variable overhead (manufacturing, marketing, distribution, customer
service, and administration) 23.00 Total variable costs $83.00     Fixed costs Manufacturing $2,580,000 Marketing, distribution, and customer service 495,000 Administrative 755,000 Total fixed costs $3,830,000 Selling price per pair of shoes $183 Expected revenues, 2016 (51,300 units) $9,387,900 Income tax rate 40%

Explanation / Answer

Income Statement for 2017: Sales revenue 10,467,600 Less: Variable cost Material (57200 units @42) 2402400 Labour (57200 units @18) 1029600 variable OH (57200*23) 1315600 Contribution margin 5,720,000 Less: Fixed cost Manufacturing 2580000 Marketing, distribution cost 495000 Admin cost 755000 Additional advertisement 405000 Net Operating income 1,485,000

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