Question 3 WONDER Ltd maker of quality pens has experienced a steady growth in sales for the past five years. However, increased competition has led the Managing Director of WONDER Ltd to believe that an aggressive advertising campaign will be necessary next year to maintain the company's present growth. To prepare for next advertising campaign, the company's accountant has prepared and presented to the Managing Director the following data for the current year 2020. COST SCHEDULE Variable cost per pen: Direct labour Direct material Variable overhead Total Variable Costs Fixed Cost: Manufacturing Selling Administrative Total Fixed Costs £ 8.00 3.25 2.50 13.75 25,000 40,000 70,000 135,000 Selling price £25 Expected sales 2020 (20,000units) £500,000 Tax Rate 20% The Managing Director has set a target for 2021 at a level of £550,000 (or 22,000 pens) Required: a. What is the projected after-tax net income for 2020? b. What is the break-even point in unit for 2020? c. The Managing Director believes that an additional selling expense of £11,250 for advertising in 2020, with other costs remaining constant, will be necessary to attain, the sales target. What will be the after-tax net income for 2020 if the additional £11,250 is spent?
Question 3 WONDER Ltd maker of quality pens has experienced a steady growth in sales for the past five years. However, increased competition has led the Managing Director of WONDER Ltd to believe that an aggressive advertising campaign will be necessary next year to maintain the company's present growth. To prepare for next advertising campaign, the company's accountant has prepared and presented to the Managing Director the following data for the current year 2020. COST SCHEDULE Variable cost per pen: Direct labour Direct material Variable overhead Total Variable Costs Fixed Cost: Manufacturing Selling Administrative Total Fixed Costs £ 8.00 3.25 2.50 13.75 25,000 40,000 70,000 135,000 Selling price £25 Expected sales 2020 (20,000units) £500,000 Tax Rate 20% The Managing Director has set a target for 2021 at a level of £550,000 (or 22,000 pens) Required: a. What is the projected after-tax net income for 2020? b. What is the break-even point in unit for 2020? c. The Managing Director believes that an additional selling expense of £11,250 for advertising in 2020, with other costs remaining constant, will be necessary to attain, the sales target. What will be the after-tax net income for 2020 if the additional £11,250 is spent?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Question 3
WONDER Ltd maker of quality pens has experienced a steady growth in sales for the
past five years. However, increased competition has led the Managing Director of
WONDER Ltd to believe that an aggressive advertising campaign will be necessary next
year to maintain the company's present growth.
To prepare for next advertising campaign, the company's accountant has prepared and
presented to the Managing Director the following data for the current year 2020.
COST SCHEDULE
Variable cost per pen:
Direct labour
Direct material
Variable overhead
Total Variable Costs
Fixed Cost:
Manufacturing
Selling
Administrative
Total Fixed Costs
£
8.00
3.25
2.50
13.75
25,000
40,000
70,000
135,000
Selling price
£25
Expected sales 2020 (20,000units)
£500,000
Tax Rate
20%
The Managing Director has set a target for 2021 at a level of £550,000 (or 22,000 pens)
Required:
a. What is the projected after-tax net income for 2020?
b. What is the break-even point in unit for 2020?
c. The Managing Director believes that an additional selling expense of £11,250
for advertising in 2020, with other costs remaining constant, will be necessary
to attain, the sales target. What will be the after-tax net income for 2020 if the
additional £11,250 is spent?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 5 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education