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Kim Ltd produces and sales men shirt. Kim plans to produce new product for next year and has estimated costs below: + Expected Variable Cost

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Kim Ltd produces and sales men shirt. Kim plans to produce new product for next year and has estimated costs below: + Expected Variable Cost per unit Direct materials $15.00 Direct labour 8.18 Manufacturing supplies 1.92 Selling expenses 4.90 Total $30.00 Selling price per unit $60 Annual Fixed Costs Taxes on property $9 870 Depreciation on building 22 920 Advertising 40 840 Others 4 970 Total $78 600 Required (show your working): (5 marks) (a) Assume that income tax rate is 25%, compute the number of units that must be sold to earn a profit after tax of $67,500. (b) If Kim Ltd plans to run new advertising campaign and at the same time reducing sales (5 marks) price to $55 per unit. By doing so Kim Ltd expects that the sales will increase by 5 000 units and increase the profit before tax $120,000. You are required to determine how much the amount of additional advertising cost needs to spend for these purposes

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