Question

a. Prepare two contribution format income statements, one showing the results of last year's operations and one showing the results of operations if these changes are made. (Do not round intermediate calculations. Round your "Per unit" answers to 2 decimal places.) Feather Friends, Inc., Contribution Income Statement Proposed 49,500 units Last Year 33,000 units Total Per Unit Total 2,640,000 $ 1,320,000 1,320,000 Per Unit Sales Variable expenses Contribution margin Fixed expenses 8000 $ 3,445,200 $ 40.00 40.00 1,980,000 1,465,200 264,000 $ 1,201,200 69.60 40.00 29.60 200,000 Net operating income 1,120,000 b. Would you recommend that the company do as the sales manager suggests? O No Yes 6. Refer to the original data. Assume again that the company sold 33,000 units last year. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $2.10 per unit. He thinks that this move, combined with some increase in advertising, would double annual unit sales. By how much could advertising be increased with profits remaining unchanged? Do not prepare an income statement; use the incremental analysis approach. The amount by which advertising can be increased wwwwwww

Number 6 is what I am having trouble finding. All other numbers are correct.

Answer 1

Requirement-6 (Specific part requested # of units sold if advertising expense and sales commission are increased Existing contribution margin per unit Less: Increase in variable comission expense per unit 66,000 [Existing # of units will be doubled--> 33,000 x 2-66000] $40.00 $2.10 Revised contribution margin per unit Expected total incremental contribution margin Less: Existing Net operating income Less: Existing Fixed expenses The amount by which advertising can be increased $37.90 $2,501,400 [66,000 x $37.90] $1,120,000 $1,181,400