Blossom Industries carries no inventories. Its product is manufactured only when customers order is received. It is then shipped immediately after it is made. For its fiscal year ended October 31, 2025. Blossoms break-even point was $1.3 million. On Sales of $1.5 million, its GAAP income statement showed a gross profit of $242,500, direct materials cost of $510,000, and direct labor cost of $630,000. The contribution margin was $180,000, and variable manufacturing overhead was $48,000. Calculate the following:

1. Variable selling and administrative expenses: $132,000

2. Fixed manufacturing overhead: $69,000

3. Fixed selling and administrative expenses: $86,500

Solve:

Ignoring your answer to above part, assume that fixed manufacturing overhead was $100,000 and the fixed selling and administrative expenses were $75,000. The Marketing vice president feels that if the company increased its advertising, sales could be increased by 19%. What is the maximum increased advertising cost the company can incur and still report the same income as before the advertising expenditure, assuming that the contribution margin ratio remains unchanged?

Maximum increased advertising expenditure: