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Question 1 (6 marks) Skyline Corp. produces a single product. The projected operating income for the coming year is as follows: Sales Variable costs
Question 1 (6 marks) Skyline Corp. produces a single product. The projected operating income for the coming year is as follows: Sales Variable costs Contribution margin Fixed costs Operating income $1,800,000 756,000 1,044,000 764,000 $ 280,000 Skyline Corp. is subject to tax at a rate of 35%. Required: a) Calculate the break-even point (in dollars) and the margin of safety (in dollars). (2 marks) b) Determine the level of sales that would generate net income after tax of $325,000. (2 marks) c) The marketing department believes that a price cut of 5%, combined with an increase in the annual advertising budget of $80,000, would increase sales by 20%. Calculate the incremental benefit of this proposal. Use incremental analysis - do NOT prepare a revised income statement. (2 marks)
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