FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question
V.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,
2014:
Variable cost (per bowl)
Direct materials
$3.00
Direct manufacturing labor
7.50
Variable overhead (manufacturing, marketing, distribution and customer service)
3.30
Total variable cost per bowl
$13.80
Fixed costs
Manufacturing
$12,000
Marketing, distribution, and customer service
214,800
Total fixed costs
$226,800
Selling price
$30.00
Expected sales, 19,500 units
$585,000
Income tax rate
40%
Requirement 3.
Mr. Wu has set the revenue target for
2015 at a level of $690,000 (or 23,000
bowls). He believes an additional marketing cost of
$19,440 for advertising in
2015, with all other costs remainingconstant, will be necessary to attain the revenue target. What is the net income for
2015 if the additional $19,440 is spent and the revenue target is met?
The target net income for 2015?
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