Variable cost (per pound)

Direct materials $3.75

Direct manufacturing labor 8.00

Variable overhead (manufacturing, marketing, distribution andcustomer service) 2.05

Total variable cost per bowl $13.80

Fixes costs

Manufacturing $12,000

Marketing, distribution, and customer service 214,800

Total fixed cost $226,800

Selling price $30

Expected sales, 19,500 units $585,000

Income tax rate 40%

S.L. Brook and? Company, a manufacturer of quality handmadewalnut? bowls, has had a steady growth in sales for the past 5years.? However, increased competition has led Mr. Brooks, the?president, to believe that an aggressive marketing campaign will benecessary next year to maintain the? company's present growth. Toprepare for next? year's marketing? campaign, the? company'scontroller has prepared and presented Mr. Brooks with the followingdata for the current? year, 2017?:

Requirement 1. What is the projected net incomefor 2017??

Revenues

-

Variable costs

-

Fixed costs

=

Target net income

/

1 – Tax rate

Compute the target net income for 2017 using the above formula.The Net Income is: ?

Requirement 2. What is the breakeven point inunits for 2017??

Compute how many bowls are needed to break even using thisformula ?(Enter applicable values to the nearest? cent, $X.XX.)

Fixed costs

/

Contribution margin per bowl

=

Bowls needed to break even

$ ? /

$ ?

=

?

Requirement 3. Mr. Brooks has set the revenuetarget for 2018 at a level of$ 690,000 (or 23,000 ?bowls). Hebelieves an additional marketing cost of $19,440 for advertising in2018?, with all other costs remaining ?constant, will be necessaryto attain the revenue target. What is the net income for 2018 ifthe additional $19,440 is spent and the revenue target is? met?

The target net income for 2018 is: $

?

Requirement 4. What is the breakeven point inrevenues for 2018 if the additional $19,440 is spent for?advertising? ?(Do not round any of your? calculations.)

The breakeven point in revenues for 2018 is: $

?

Requirement 5. If the additional $19,440 is?spent, what are the required 2018 revenues for 2018 net income toequal 20172017 net? income?

Using the basic formula determined in requirement? 1, computethe required number of units? first, then the required revenue.?(Do not round any of your? calculations.)

The required number of units is:

?

The required revenue is: $

?

Requirement 6. At a sales level of 23,000units, what maximum amount can be spent on advertising if a 2018net income of $75,516 is? desired? ?(Do not round any of your?calculations.) Use the basic formula determined in requirement1.

The maximum amount that can be spent on advertising is: $

?