R. A. Ro and Company, maker of quality handmade pipes, has experienced a steady growth in ANALYSIS sales for the past 5 years. However, increased competition has led Mr. Ro, the president, to believe that an aggressive advertising campaign will be necessary next year to maintain the company’s present growth.: pg56 To prepare for next year’s advertising campaign, the company’s accountant has prepared and presented Mr. Ro with the following data for the current year, 19X2:

Mr. Ro has set the sales target for 19X3 at a level of $550,000 (or 22,000 pipes).
Required:
a What is the projected after-tax net income for 19X2?
b What is the break-even point in units for 19X2?
c Mr. Ro believes an additional selling expense of $11,250 for advertising in 19X3, with all other costs remaining constant, will be necessary to attain the sales target. What will be the after-tax net income for 19X3 if the additional $11,250 is spent?
d= What will be the break-even point in dollar sales for 19X3 if the additional $11,250 is spent for advertising?
e If the additional $11,250 is spent for advertising in 19X3, what is the required sales level in dollar sales to equal 19X2’s after-tax net income?
f Atasales level of 22,000 units, what is the maximum amount which can be spent on advertising if an after-tax net income of $60,000 is desired?

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Variable costs: Direct labor Direct materials Variable overhead Total variable costs. Fixed costs: Manufacturing.. Selling... Administrative... Total fixed costs Selling price, per pipe Expected sales, 19X2 (20,000 units) Tax rate.... $ 8.00/pipe 3.25/pipe 2.50/pipe $13.75 pipe $ 25,000 40,000 70,000 $135,000 $25.00 $500,000 40%