3-41 CVP analysis, income taxes. (CMA, adapted) J.T. Brooks and Company, a manufacturer of qual- ity handmade walnut bowls, has had a steady growth in sales for the past 5 years. However, increased competition has led Mr. Brooks, the president, to believe that an aggressive marketing campaign will be neces- sary 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. Brooks with the following data for the current year, 2020: Variable cost (per bowl) Direct materials Direct manufacturing labor Variable overhead (manufacturing, marketing, distribution, and customer service) Total variable cost per bowl Fixed costs Manufacturing Marketing, distribution, and customer service Total fixed costs Selling price Expected sales, 22,000 units Income tax rate $ 3.00 8.00 7.50 $ 18.50 $ 20,000 194,500 $214,500 $35.00 $770,000 40% 1. What is the projected net income for 2020? 2. What is the breakeven point in units for 2020? 3. Mr. Brooks has set the revenue target for 2021 at a level of $875,000 (or 25,000 bowls). He believes an additional marketing cost of $16,500 for advertising in 2021, with all other costs remaining constant, will be necessary to attain the revenue target. What is the net income for 2021 if the additional $16,500 is spent and the revenue target is met? 4. What is the breakeven point in revenues for 2021 if the additional $16,500 is spent for advertising? 5. If the additional $16,500 is spent, what are the required 2021 revenues for 2021 net income to equal 2020 net income? 6. At a sales level of 25,000 units, what maximum amount can be spent on advertising if a 2021 net income of $108,450 is desired?
3-41 CVP analysis, income taxes. (CMA, adapted) J.T. Brooks and Company, a manufacturer of qual- ity handmade walnut bowls, has had a steady growth in sales for the past 5 years. However, increased competition has led Mr. Brooks, the president, to believe that an aggressive marketing campaign will be neces- sary 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. Brooks with the following data for the current year, 2020: Variable cost (per bowl) Direct materials Direct manufacturing labor Variable overhead (manufacturing, marketing, distribution, and customer service) Total variable cost per bowl Fixed costs Manufacturing Marketing, distribution, and customer service Total fixed costs Selling price Expected sales, 22,000 units Income tax rate $ 3.00 8.00 7.50 $ 18.50 $ 20,000 194,500 $214,500 $35.00 $770,000 40% 1. What is the projected net income for 2020? 2. What is the breakeven point in units for 2020? 3. Mr. Brooks has set the revenue target for 2021 at a level of $875,000 (or 25,000 bowls). He believes an additional marketing cost of $16,500 for advertising in 2021, with all other costs remaining constant, will be necessary to attain the revenue target. What is the net income for 2021 if the additional $16,500 is spent and the revenue target is met? 4. What is the breakeven point in revenues for 2021 if the additional $16,500 is spent for advertising? 5. If the additional $16,500 is spent, what are the required 2021 revenues for 2021 net income to equal 2020 net income? 6. At a sales level of 25,000 units, what maximum amount can be spent on advertising if a 2021 net income of $108,450 is desired?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:3-41 CVP analysis, income taxes. (CMA, adapted) J.T. Brooks and Company, a manufacturer of qual-
ity handmade walnut bowls, has had a steady growth in sales for the past 5 years. However, increased
competition has led Mr. Brooks, the president, to believe that an aggressive marketing campaign will be neces-
sary 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. Brooks with the following data for the current year, 2020:
Variable cost (per bowl)
Direct materials
Direct manufacturing labor
Variable overhead (manufacturing, marketing,
distribution, and customer service)
Total variable cost per bowl
Fixed costs
Manufacturing
Marketing, distribution, and customer service
Total fixed costs
Selling price
Expected sales, 22,000 units
Income tax rate
$ 3.00
8.00
7.50
$ 18.50
$ 20,000
194,500
$214,500
$35.00
$770,000
40%
1. What is the projected net income for 2020?
2. What is the breakeven point in units for 2020?
3.
Mr. Brooks has set the revenue target for 2021 at a level of $875,000 (or 25,000 bowls). He believes an
additional marketing cost of $16,500 for advertising in 2021, with all other costs remaining constant, will
be necessary to attain the revenue target. What is the net income for 2021 if the additional $16,500 is
spent and the revenue target is met?
4. What is the breakeven point in revenues for 2021 if the additional $16,500 is spent for advertising?
5. If the additional $16,500 is spent, what are the required 2021 revenues for 2021 net income to equal 2020
net income?
6. At a sales level of 25,000 units, what maximum amount can be spent on advertising if a 2021 net income
of $108,450 is desired?
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