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 overhead 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?
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 overhead 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?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 overhead | 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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