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Skyline Corp. produces a single product. The projected operating income for the coming year is as follows: Sales $1,800,000 Variable costs 756 000 Contribution margin
Skyline Corp. produces a single product. The projected operating income for the coming year is as follows: Sales $1,800,000 Variable costs 756 000 Contribution margin 1,044,000 Fixed costs 764 000 Operating income M 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 benet of this proposal. Use incremental analysis do NOT prepare a revised income statement. (2 marks)
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