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has prepared and presented the following financial dată től Variable costs: Direct labor (per unit) Direct materials (per unit) Variable overhead (per unit) Total variable costs (per unit) Fixed costs (annual): Manufacturing Selling Administrative Total fixed costs (annual) $19 11 15 $45 $ 94,200 77,000 162,000 $ 333,200 $80 $ 2,140,000 Selling price (per unit) Expected sales revenues, year 1 (35,400 units) Davis has an income tax rate of 22 percent. The CMO has set the sales target for year 2 at a level of $2,440,000 (or 42,000 units). The CMO believes that market conditions revent any possible increase in price. equired: What is the projected after-tax operating profit for year 1? What is the break-even point in units for year 1? The CMO believes that attaining the sales target (42,000 units) will require additional selling expenses of $52,500 for advertising in year 2, with all other costs remaining constant. What will be the after-tax operating profit for year 2 if the firm spends the additional $52,500? What will be the break-even point in sales dollars for year 2 if the firm spends the additional $52,500 for advertising? Note: Solve by computing volume in units first. If the firm spends the additional $52,500 for advertising in year 2, what is the sales level in dollars required to equal the year 1 after- tax operating profit? Note: Solve by computing volume in units first. At a sales level of 42,000 units, what is the maximum amount the firm can spend on advertising to earn an after-tax onerating of $717,522?

has prepared and presented the following financial dată től Variable costs: Direct labor (per unit) Direct materials (per unit) Variable overhead (per unit) Total variable costs (per unit) Fixed costs (annual): Manufacturing Selling Administrative Total fixed costs (annual) $19 11 15 $45 $ 94,200 77,000 162,000 $ 333,200 $80 $ 2,140,000 Selling price (per unit) Expected sales revenues, year 1 (35,400 units) Davis has an income tax rate of 22 percent. The CMO has set the sales target for year 2 at a level of $2,440,000 (or 42,000 units). The CMO believes that market conditions revent any possible increase in price. equired: What is the projected after-tax operating profit for year 1? What is the break-even point in units for year 1? The CMO believes that attaining the sales target (42,000 units) will require additional selling expenses of $52,500 for advertising in year 2, with all other costs remaining constant. What will be the after-tax operating profit for year 2 if the firm spends the additional $52,500? What will be the break-even point in sales dollars for year 2 if the firm spends the additional $52,500 for advertising? Note: Solve by computing volume in units first. If the firm spends the additional $52,500 for advertising in year 2, what is the sales level in dollars required to equal the year 1 after- tax operating profit? Note: Solve by computing volume in units first. At a sales level of 42,000 units, what is the maximum amount the firm can spend on advertising to earn an after-tax onerating of $717,522?

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter7: Variable Costing For Management analysis
Section: Chapter Questions
Problem 9E: The following data were adapted from a recent income statement of Caterpillar Inc. (CAT) for the...
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has prepared and presented the following financial data for the current year, year 1: Variable costs: Direct labor (per unit) Direct materials (per unit) Variable overhead (per unit) Total variable costs (per unit) Fixed costs (annual): Manufacturing Selling Administrative Total fixed costs (annual) $ 19 11 15 $ 45 $ 94,200 77,000 162,000 $ 333,200 Selling price (per unit) Expected sales revenues, year 1 (35,400 units) Davis has an income tax rate of 22 percent. The CMO has set the sales target for year 2 at a level of $2,440,000 (or 42,000 units). The CMO believes that market conditions prevent any possible increase in price. $ 80 $ 2,140,000 Required: a. What is the projected after-tax operating profit for year 1? b. What is the break-even point in units for year 1? c. The CMO believes that attaining the sales target (42,000 units) will require additional selling expenses of $52,500 for advertising in year 2, with all other costs remaining constant. What will be the after-tax operating profit for year 2 if the firm spends the additional $52,500? d. What will be the break-even point in sales dollars for year 2 if the firm spends the additional $52,500 for advertising? Note: Solve by computing volume in units first. e. If the firm spends the additional $52,500 for advertising in year 2, what is the sales level in dollars required to equal the year 1 after- tax operating profit? Note: Solve by computing volume in units first. f. At a sales level of 42,000 units, what is the maximum amount the firm can spend on advertising to earn an after-tax operating profit of $717,522?
Transcribed Image Text:has prepared and presented the following financial data for the current year, year 1: Variable costs: Direct labor (per unit) Direct materials (per unit) Variable overhead (per unit) Total variable costs (per unit) Fixed costs (annual): Manufacturing Selling Administrative Total fixed costs (annual) $ 19 11 15 $ 45 $ 94,200 77,000 162,000 $ 333,200 Selling price (per unit) Expected sales revenues, year 1 (35,400 units) Davis has an income tax rate of 22 percent. The CMO has set the sales target for year 2 at a level of $2,440,000 (or 42,000 units). The CMO believes that market conditions prevent any possible increase in price. $ 80 $ 2,140,000 Required: a. What is the projected after-tax operating profit for year 1? b. What is the break-even point in units for year 1? c. The CMO believes that attaining the sales target (42,000 units) will require additional selling expenses of $52,500 for advertising in year 2, with all other costs remaining constant. What will be the after-tax operating profit for year 2 if the firm spends the additional $52,500? d. What will be the break-even point in sales dollars for year 2 if the firm spends the additional $52,500 for advertising? Note: Solve by computing volume in units first. e. If the firm spends the additional $52,500 for advertising in year 2, what is the sales level in dollars required to equal the year 1 after- tax operating profit? Note: Solve by computing volume in units first. f. At a sales level of 42,000 units, what is the maximum amount the firm can spend on advertising to earn an after-tax operating profit of $717,522?
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