Apex Limited manufactures high quality crystal glasses, and has experienced a steady growth in sales over the past five years. However, increased competition has led the managing director, Jim Smith, to believe that an aggressive advertising campaign will be necessary in order to maintain Apex's present growth rate into next year - 20X5.

To prepare for next year's advertising campaign, the company's cost accountant has prepared the following data for Mr Smith relating to 20X4:

Cost Schedule

Variable Costs:

Direct labour $8.00 per glass

Direct materials 3.25 per glass

Variable overheads 2.50 per glass

TOTAL VARIABLE COSTS $13.75

Fixed Costs:

Manufacturing 25,000

Selling 40,000

Administrative 70,000

TOTAL FIXED COSTS $135,000

Selling price $25.00 per glass

Expected sales (20X4) 20,000 units

Jim Smith has set the sales target for 20X5 at a level of 22,000 units, keeping the same selling price as 20X4. The tax rate is 40%.

i) What is the projected after-tax net profit of Apex Ltd. for each of 20X4 and 20X5? (Prepare a Contribution Margin Income Statement)

ii) What is the break-even point (in units) for each of 20X4 and 20X5?

iii) Mr Smith believes that an additional outlay of $11,250 for advertising in 20X5 (with other costs remaining constant) will be needed to achieve the sales target set for that year. What will be the after-tax net profit for 20X5 if this additional $11,250 is spent?

iv) What will be the break-even point (in $s) for 20X5 if the additional $11,250 is spent?

v) Assuming the advertising campaign is undertaken, what is the required 20X5 sales level (in $'s) to equal 20X4's after-tax net profit?