Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Eagle Company makes the MusicFinder, a sophisticated satellite radio. Eagle has experienced a steady growth in sales for the past five years. However, Ms. Luray,

image text in transcribedimage text in transcribed

Eagle Company makes the MusicFinder, a sophisticated satellite radio. Eagle has experienced a steady growth in sales for the past five years. However, Ms. Luray, Eagle's CEO, believes that to maintain the company's present growth will require an aggressive advertising campaign next year. To prepare for the campaign, the compan Ms. Luray the following data for the current year, year 1: y's accountant, Mr. Bednarik, has prepared and presented to Variable costs: Direct labor (per unit) Direct materials (per unit) Variable overhead (per unit) 83 45 15 143 Total variable costs (per unit) Fixed costs (annual): Manufacturing Selling Administrative 396,000 290,000 781,000 $ 1,467,000 413 $8,673,000 Total fixed costs (annual) Selling price (per unit) Expected sales revenues, year 1 (21,000 units) Eagle has an income tax rate of 35 percent. Ms. Luray has set the sales target for year 2 at a level of $10,738,000 (or 26,000 radios), Required: a. What is the projected after-tax operating profit for year 1? After-tax operating profit b. What is the break-even point in units for year 1? (Round up your answer to the nearest whole number.) units c. Ms. Luray believes that to attain the sales target (26,000 radios) will require additional selling expenses of $296,000 for advertising in year 2, with all other costs remaining constant. What will be the after-tax operating profit for year 2 if the firm spends the additional $296,000? After-tax operating profit d. What will be the break-even point in sales dollars for year 2 if the firm spends the additional $296,000 for advertising? (Solve by computing volume in units first. Round up units to the nearest whole number and round your final answer to the nearest whole dollar amount.) Break-even in sales e. If the firm spends the additional $296,000 for advertising in year 2, what is the sales level in dollars required to equal the year 1 after-tax operating profit? (Solve by computing volume in units first. Round up units to the nearest whole number and round your final answer to the nearest whole dollar amount.) Sales level

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Integral Audit Acceptions Objectives And Practices

Authors: David Pavón, Catalina Rueda

1st Edition

6206302083, 978-6206302087

More Books

Students also viewed these Accounting questions