Problem:
Rock is sold to contractors who use the product in construction projects. Needs to increase sales by advertising. Spend $100,000 advertising campaign. currently sells 25,000 tons for a total revenue of $5,000,000.
Direct Labor............... $1,500,000
Variable production overhead........... 200,000
fixed production overhead................. 350,000
Selling and admministrative expenses
Variable................................... 50,000
fixed........................................ 300,000
a. Compute break-even point in units (i.e. tons)
b. Compute the contribution margin ratio
c. will spend $100,000 on advertising and the company expects the advertising to increase sales by $200,000. Should the company increase advertising and Why?