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, Mr 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%.

Question:

vi) At a sales level of 22,000 units, what is the maximum amount that can be spent on advertising if a 20X5 before-tax net profit of $100,000 is desired?