Kaiser Industries carries no inventories. Its product is manufactured only when a customers order is received. It is then shipped immediately after it is made. For its fiscal year ended October 31, 2014, Kaisers break-even point was $1.36 million. On sales of $1.17 million, its income statement showed a gross profit of $177,000, direct materials cost of $402,500, and direct labor costs of $507,600. The contribution margin was $177,000, and variable manufacturing overhead was $51,800.

(a) Calculate the following: 1.Variable selling and administrative expenses. 2.Fixed manufacturing overhead. 3.Fixed selling and administrative expenses. (b) Ignoring your answer to part (a), assume that fixed manufacturing overhead was $100,100 and the fixed selling and administrative expenses were $75,100. The marketing vice president feels that if the company increased its advertising, sales could be increased by 20%. What is the maximum increased advertising cost the company can incur and still report the same income as before the advertising expenditure?

1.Maximum increased advertising expenditure