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FOX COMPANY
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PROJECTED INCOME STATEMENT
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FOR THE YEAR ENDING DECEMEBER 31, 2004
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Revenues
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$400,000
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Variable Costs:
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Variable manufacturing costs
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$100,000
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Variable selling costs
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60,000
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Total Variable Costs
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160,000
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Contribution Margin
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$240,000
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Fixed Costs:
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Fixed manufacturing costs
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$110,000
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Fixed selling and administrative costs
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70,000
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Total Fixed Costs
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180,000
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Income
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$60,000
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The projected income statement was based upon sales of 20,000 units. Fox has the capacity to produce 25,000 units during the year.
- Determine breakeven point in units.
- The sales manager believes the company could increase sales by 3,000 units if advertising expenditures are increased by $30,000. Determine the effect on income if the company increases advertising expenditures.