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?
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?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A-6
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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