Question

Sandhill Industries carries no inventories. Its product is manufactured only when a customer's order is received. It is then shipped immediately after it is made. For its fiscal year ended October 31, 2020, Sandhill's break-even point was $1.35 million. On sales of $1.19 million, its income statement showed a gross profit of $202,600, direct materials cost of $405,000, and direct labor costs of $505,000. The contribution margin was $166,600, and variable manufacturing overhead was $51,000. Your answer is correct. Calculate the following: 1. Variable selling and administrative expenses. $ 62400 2. Fixed manufacturing overhead. 26400 3. Fixed selling and administrative expenses. 162600 e Textbook and Media Assistance Used Attempts: 1 of 3 used Ignore your answer to above part, assume that fixed manufacturing overhead was $102,000 and the fixed selling and administrative expenses were $76,000. The marketing vice president feels that if the company increased its advertising, sales could be increased by 20%. What is the maximum increased advertising cost the company can incur and still report the same income as before the advertising expenditure? Maximum increased advertising expenditure $

Answer 1

Calculate maximum increased advertising expense

Sales (1190000*1.2)	1428000
Direct material (405000*1.2)	-486000
Direct labor (505000*1.2)	-606000
Variable manufacturing overhead (51000*1.2)	-61200
Variable selling and administrative expense (62400*1.2)	-74880
Contribution margin	199920
Fixed manufacturing overhead	-102000
Fixed selling and administrative expense	-76000
Net operating loss	22400
Maximum advertising	44320