R.A. Ro and Company, maker of quality handmade pipes, has experienced a steady growth in sales for the past five 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.

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, 20X2:

{Required:}

(a) What is the projected after-tax net income for \(20 \times 2\) ?

(b) What is the breakeven point in units for 20X2?

(c) Mr. Ro believes an additional selling expense of \(\$ 11,250\) for advertising in 20X3, with all other costs remaining constant, will be necessary to attain the sales target. What will be the after-tax net income for \(20 \mathrm{X} 3\) if the additional \(\$ 11,250\) is spent?

(d) What will be the breakeven point in dollar sales for \(20 \times 3\) if the additional \(\$ 11,250\) is spent for advertising?

(e) If the additional \(\$ 11,250\) is spent for advertising in \(20 \times 3\), what is the required sales level in dollar sales to equal \(20 \mathrm{X} 2\) 's after-tax net income?

(f) At a sales level of 22,000 units, what is the maximum amount that 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. Cost Schedule Expected sales, 20X2 (20,000 units): Tax rate: 10% $ 8.00/pipe 3.25/pipe 2.50/pipe $13.75/pipe $ 25,000 40,000 70,000 $135,000 . $25.00 $500,000 Mr. Ro has set the sales target for 20X3 at a level of $550,000 (or 22,000 pipes).