Question

D.L. Wu and Company, a manufacturer of quality handmade walnut bowls, has had a steady growth in sales for the past 5 years. However, increased competition has led Mr. Wu, the president, to believe that an aggressive marketing campaign will be necessary next year to maintain the company's present growth. To prepare for next year's marketing campaign, the company's controller has prepared and presented Mr. Wu with the following data for the current year, 2017: Click the icon to view the data.) Read the requirements i Data Table Requirement 1. What is the projected net income for 2017? Using the equation method, select the basic formula used to compute the target net income for 2017. Revenues Variable costs Fixed costs = Target net income + 1 - Tax rate $ 3.00 The target net income for 2017 is Variable cost (per bowl) Direct materials Direct manufacturing labor Variable overhead manufacturing, marketing, distribution and customer service) 8.50 0.10 i Requirements $ Total variable cost per bowl 11.60 Fixed costs $ 1. 2. 3. Manufacturing Marketing, distribution, and customer service 20,000 206,200 $ 226,200 What is the projected net income for 2017? What is the breakeven point in units for 2017? Mr. Wu has set the revenue target for 2018 at a level of $667.000 (or 23,000 bowis). He believes an additional marketing cost of $27.840 for advertising in 2018, with all other costs remaining constant, will be necessary to attain the revenue target. What is the net income for 2018 if the additional $27,840 is spent and the revenue target is met? What is the breakeven point in revenues for 2018 if the additional $27,840 is spent for advertising? If the additional $27,840 is spent, what are the required 2018 revenues for 2018 net income to equal 2017 net income? At a sales level of 23,000 units, what maximum amount can be spent on advertising if a 2018 net income of $87,546 is desired? 4. Total fixed costs Selling price Expected sales, 19,000 units Income tax rate $ $ 29.00 551,000 5. 40% 6. Print Done Print Done Clear All Check Answer

Answer 1

5.) Required 2018 Revenues for 2018 het locome to Cquierdaboda 2017 pet locome : Expected sales quantity fixed Cost + Netlncome of 2017 (1-40-l.) Cootube lion Hargini 254040 + 62640 0.60 17:40 - 2018 20,600 Budgeled Revenue = selling price & quantity units to (2018) be sold = $29 x 20600 units -$597,200 6) Maximum amount can be spent on adveitising if net Income of $87,546 is desired Maximum Amount to spent on advertising - (contribution Total Desired Net Mailgin Fixed cost Income for 2018 (201) (1-Tax Rate) = (17.40 x 23000 - 226,200) 226,200) – 87546 (-40%) f100, 200 - 226,200) -87546 - Expected 0.60 174000 87546 0.60 17H000 T45910 28090