Aero Space Company (Pty) ltd Projected Income Statement For the Current Year Ending December 31 Sales (12,000 units) R240,000 Less variable costs: Variable manufacturing costs R60,000 Variable selling costs 36,000 Total variable costs 96,000 Contribution margin R144,000 Less fixed costs: Fixed manufacturing costs R85,000 Fixed selling and administrative costs 35,000 Total fixed costs 120,000 Operating income R 24,000 Required: 1. Determine the break-even point in Rands 2. The sales manager believed the company could increase sales by 1,000 units if advertising expenditures were increased by R15,000. By how much will operating income increase or decrease if the advertising is increased as suggested? 3.. What is the maximum amount the company could pay for advertising if the advertising would increase sales by 1,000 units?
Aero Space Company (Pty) ltd
For the Current Year Ending December 31
Sales (12,000 units) R240,000
Less variable
Variable manufacturing
Variable selling costs 36,000
Total variable costs 96,000
Contribution margin R144,000
Less fixed costs:
Fixed manufacturing costs R85,000
Fixed selling and administrative costs 35,000
Total fixed costs 120,000
Operating income R 24,000
Required:
1. Determine the break-even point in Rands
2. The sales manager believed the company could increase sales by 1,000 units if advertising expenditures were increased by R15,000. By how much will operating income increase or decrease if the advertising is increased as
suggested?
3.. What is the maximum amount the company could pay for advertising if the advertising would increase sales by 1,000 units?
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