Whitney Company's board of director believes that the company's problem lies in adequate promotion. By how much can advertising be increased and still allow the company to earn a target profit of 4.5% on slaes of 60,000 units? WHITNEY COMPANYIncome StatementFor the Year Ended December 31Sales (45,000 units at $10 per unit) .Less cost of goods sold:$450,000Direct materials$90,000Direct labor .78,30098,500Manufacturing overhead266,800Gross margin ....Less operating expenses:Selling expenses:183,200Variable:Sales commissions$27,000Shipping5,40032,400Fixed (advertising, salaries)120,000Administrative:Variable (billing and other)Fixed (salaries and other)1,80048,000202,200Net operating loss$ (19,000)

Number of units sold = 45,000 units Variable cost Total cost amount Cost per unit (Total cost…

WHITNEY COMPANY Income Statement For the Year Ended December 31 Sales (45,000 units at $10 per unit) ... Less cost of goods sold: $450,000 Direct materials $90,000 78,300 98,500 Direct labor Manufacturing overhead 266,800 Gross margin Less operating expenses: Selling expenses: Variable: 183,200 $27,000 5,400 Sales commissions Shipping 32,400 . .. Fixed (advertising, salaries) 120,000 Administrative: Variable (billing and other) Fixed (salaries and other) 1,800 48,000 202,200 Net operating loss $ (19,000)

WHITNEY COMPANY Income Statement For the Year Ended December 31 Sales (45,000 units at $10 per unit) ... Less cost of goods sold: $450,000 Direct materials $90,000 78,300 98,500 Direct labor Manufacturing overhead 266,800 Gross margin Less operating expenses: Selling expenses: Variable: 183,200 $27,000 5,400 Sales commissions Shipping 32,400 . .. Fixed (advertising, salaries) 120,000 Administrative: Variable (billing and other) Fixed (salaries and other) 1,800 48,000 202,200 Net operating loss $ (19,000)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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