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Kokomochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch. Kokomochi plans to spend $3.5 million on
Kokomochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch. Kokomochi plans to spend $3.5 million on TV, radio and print advertising this year for the campaign. The ads are expected to boost sales of the Mini Mochi Munch by $7.7 million this year and $5.7 million next year. In addition, the company expects that new consumers who try the Mini Mochi Munch will be more likely to try Kokomochi's other products. As a result, sales of other products are expected to rise by $1.5 million each year. Kokomochi's gross profit margin for the Mini Mochi Munch is 33%, and its gross profit margin averages 22% for all other products. The company's marginal corporate tay rate is 30% both this year and next year. What are the incremental earnings associated with the advertising campaign? Complete the table for year 1 below: (Round to the nearest dollar.) Incremental earnings forecast Year 1 Sales of Mini Mochi Munch Other sales Cost of goods sold Gross profit Selling, general and admin. expenses Depreciation litini EBIT $ Income tax at 30% Unlevered net profit Complete the table for year 2 below: (Round to the nearest dollar.) Incremental earnings forecast Year 2 Sales of Mini Mochi Munch $ Other sales Cost of goods sold Gross profit $ Selling, general and admin. expenses Depreciation litici EBIT $ Income tax at 30% Unlevered net profit $
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