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The Pakistan Cables (Pvt) Ltd., a manufacturer of quality electric cables, has experienced a steady growth in its sales for the past five years. Increased
The Pakistan Cables (Pvt) Ltd., a manufacturer of quality electric cables, has experienced a steady growth in its sales for the past five years. Increased competition, however, has led the CEO to believe that an aggressive advertising campaign will be necessary next year to maintain the company's present growth. To prepare for next year's advertising campaign, the accountant presents the following data for the current year i.e. 2020: Variable Cost: Direct Labor Rs. 8.00 per unit Direct Material 3.25 per unit Variable FOH 2.50 per unit Page 4 of 4 Fixed Cost: Manufacturing Marketing Administrative 25,000 40,000 70,000 Sales Price Per Unit 25 Expected Sales, 2020 (20,000 units) 500,000 The company set the 2021 sales target at a level of Rs. 550,000 or 22,000 units. Required: 1. The projected Net Income for 2020. 2. The breakeven point in units for 2020. 3. The net income for 2021 if an additional fixed marketing expense of Rs. 11,250 is spent for advertising in 2021. All other cost remains constant. 4. The breakeven point in amount sales for 2021 if an additional fixed marketing expense of Rs. 11,250 is spent for advertising- 5. The required amount of sales to equal 2020 net income, if an additional fixed marketing expense of Rs. 11,250 is spent for advertising in 2021. 6. The maximum amount that can be spent on additional advertising at a sales level of 22,000 units, if net income of Rs.100,000 is desired
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