FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Connelly Incorporated, a manufacturer of quality electric ice cream makers, has experienced a steady growth in sales over the past few years. Because her business has grown, Jan DeJaney, the president, believes she needs an aggressive advertising campaign next year to maintain the company’s growth. To prepare for the growth, the accountant prepared the following data for the current year:
Variable costs per ice cream maker | |
---|---|
Direct labor | $ 13.50 |
Direct materials | 14.50 |
Variable |
6.00 |
Total variable costs | $ 34.00 |
Fixed costs | |
Manufacturing | $ 82,500 |
Selling | 42,000 |
Administrative | 356,000 |
Total fixed costs | $ 480,500 |
Selling price per unit | $ 67.00 |
Expected sales (units) | 30,000 |
a. What will be the new breakeven point if the additional $200,000 is spent on advertising?
b. Prepare a contribution income statement at the new breakeven point.
c. What is the percentage change in both fixed costs and in the breakeven point?
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