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NDLOVU INDUSTRIES PROJECTED INCOME STATEMENT FOR THE CURRENT YEAR ENDING DECEMBER 3 1 Sales R 7 5 0 0 0 0 Less variable costs: Variable

 
NDLOVU INDUSTRIES
PROJECTED INCOME STATEMENT FOR THE CURRENT YEAR ENDING DECEMBER 31
Sales
R750000
Less variable costs:
Variable manufacturing costs
R280000
Variable selling costs
120000
Total variable costs
400000
Contribution margin
R350000
Less fixed costs:
Fixed manufacturing costs
R130000
Fixed selling and administrative costs
80000
Total fixed costs
210000
Operating income (profit)
R140000
The projected income statement was based on sales of 100000 units. Ndlovu has the capacity to produce 120000 units during the year.
 
 
Required:
a.
Determine the break-even point in units. b. The sales manager believes the company could increase sales by 8000 units if advertising expenditures were increased by R22000. Determine the effect on income if the company increases advertising expenditures.
c.
What is the maximum amount the company could pay for advertising if the advertising would increase sales by 8000 units?



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