Martin Footwear Co. produces high-quality shoes. To prepare for next year's marketing campaign, the company's controller has prepared the following information for the current year, 2016:

Instructions
(a) Calculate the projected operating income before tax for 2016.
(b) Calculate the break-even point in units for 2016.
(c) The company controller has set the revenue target for 2017 at $9.9 million (or 55,000 pairs). He believes an additional marketing cost of $400,000 for advertising in 2017, with all other costs remaining constant, will be necessary to attain the revenue target. Calculate the operating income for 2017 if the additional $400,000 is spent and the revenue target is met.

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Variable costs (per pair of shoes) Direct materials Direct manufacturing labour Variable overhead (manufacturing, marketing, distribution, customer service, and administration) Total variable costs $40.00 19.00 21.00 $80.00 Fixed costs Manufacturing Marketing, distribution, and customer service Administrative $2,750,000 500,000 750,000 $4,000,000 Total fixed costs Selling price per pair of shoes Expected revenues, 2016 (50,000 units) Income tax rate 180 $9,000,000 40%