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Q1-2 Q 3-5 Selling Price Variable Cost Per Unit Fixed Costs Units Sold 1- Income Statement Part 3 - Income Statement Part 5- Target Net Income Sales Sales Per Unit Units Total Sales Variable Costs Contribution Margin Fixed Costs Variable Costs Variable Costs Contribution Margin Fixed Costs Contribution Margin Fixed Costs Net Income Net Income Net Income Part 4 - Break-Even Part 2 - Break-Even Per Unit Units TOTAL Per Unit Units Total Sales Sales Variable Costs Variable Costs Contribution Margin Fixed Costs Contribution Margin Fixed Costs Net Income Net Income CVP analysis, income taxes. (CMA, adapted) J.T. Brooks and Company, a manufacturer of quality handmade walnut bowls, has had a steady growth in sales for the past 5 years. However, increased competition has led Mr. Brooks, the president, to believe that an aggressive marketing campaign will be necessary next year to maintain the company's present growth. To prepare for next year's marketing campaign, the company's controller has prepared and presented Mr. Brooks with the following data for the current year, 2017: Variable cost (per bowl) Direct materials 3.00 Direct manufacturing labor 8.00 Variable overhead (manufacturing, marketing, distribution, and customer service) 7.50 $ 18.50 Total variable cost per bowl 4. What is the breakeven point in revenues for 2018 if the additional $16,500 is Fixed costs $ 20,000 194,500 $214,500 $ 35.00 $770,000 spent for advertising? Manufacturing Marketing, distribution, and customer service 5. If the additional $16,500 is spent, what are the required 2018 revenues for 2018 Total fixed costs Selling price Expected sales, 22,000 units net income to equal 2017 net income? Income tax rate 40% 6. At a sales level of 25,000 units, what maximum amount can be spent on advertising if a 2018 net income of $108,450 is desired? Required 1. What is the projected net income for 2017? 2. What is the breakeven point in units for 2017? 3. Mr. Brooks has set the revenue target for 2018 at a level of $875,000 (or 25,000 bowls). He believes an additional marketing cost of $16,500 for advertising in

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