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P Problem no. 1 Corning Company, a manufacturer of handmade walnut bowls, has experienced a steady growth in sales for the past five years. However,
P Problem no. 1 Corning Company, a manufacturer of handmade walnut bowls, has experienced a steady growth in sales for the past five years. However, increased competition has led its president to believe that an aggressive marketing campaign will be necessary next year to maintain the company's present growth. To prepare for the next year's marketing campaign, the company controller has prepared and presented the president with the following data for 2018. Variable cost (per bowl) Direct manufacturing labor 8.00 Direct materials 3.25 Variable overhead (Manufacturing, Distribution, and administration) 2.50 Total variable costs P 13.25 Fixed cost: Manufacturing 25,000 Selling Expense 40,000 Administrative Expense 70,000 Total Fixed cost P 135,000 Selling price per bowl P 25.00 Expected sales, 2019 (20,000 units,) P500,000 income tax rate is 40% Required: 1. What is the projected profit for 2019? 2. What is the break even point in units? In Pesos? 3. The president has set the sales target for 2019 at a level of P550,000 for 22,000 bowls. He believes an additional marketing cost of P11,250 for advertising in 2019 with all other costs remaining constant, will be necessary to attain the peso sales target. What will be the profit for 2019 if additional P11,250 is spent and the peso target is met? 4. What will be the break even point in peso sales for 2019 if the additional P11,250 is spent for advertising? 5. At a sales level of 22,000 units, what maximum amount can be spent on advertising if a 2019 profit of P60,000 is desired
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