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FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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
Transcribed Image Text:Blossom 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, 2025, Blossom's break-even point was $1.35 million. On sales of
$1.50 million, its GAAP income statement showed a gross profit of $227,500, direct materials cost of $520,000, and direct labor costs
of $635,000. The contribution margin was $165,000, and variable manufacturing overhead was $50,000.
(a)
Calculate the following:
1.
Your answer is correct.
2.
Variable selling and administrative expenses.
Fixed manufacturing overhead.
3. Fixed selling and administrative expenses.
$
Maximum increased advertising expenditure $
$
130000
67500
81000
Ignoring your answer to above part, assume that fixed manufacturing overhead was $100,000 and the fixed selling and
administrative expenses were $84,000. The marketing vice president feels that if the company increased its advertising, sales
could be increased by 21%. What is the maximum increased advertising cost the company can incur and still report the same
income as before the advertising expenditure, assuming that the contribution margin ratio remains unchanged?
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