T.J.

Brown

and Company, a manufacturer of quality handmade walnut bowls, has had a steady growth in sales for the past 5 years. However, increased competition has led Mr.

Brown,

the president, to believe that an aggressive marketing campaign will be necessary next year to maintain the company's present growth. To prepare for next year's marketing campaign, the company's controller has prepared and presented Mr.

Brown

with the following data for the current year,

2017

Variable cost (per bowl)
	Direct materials		$3.75
	Direct manufacturing labor		7.50
	Variable overhead (manufacturing, marketing, distribution and customer service)		1.35
		Total variable cost per bowl	$12.60
Fixed costs
	Manufacturing		$18,000
	Marketing, distribution, and customer service		166,800
		Total fixed costs	$184,800
Selling price			$28.00
Expected sales, 21,500 units			$602,000
Income tax rate			40%

1.	What is the projected net income for 2017?
2.	What is the breakeven point in units for 2017?
3.	Mr. Brown has set the revenue target for 2018 at a level of $672,000 (or 24,000 bowls). He believes an additional marketing cost of $33,880 for advertising in 2018, with all other costs remaining constant, will be necessary to attain the revenue target. What is the net income for 2018 if the additional $33,880 is spent and the revenue target is met?
4.	What is the breakeven point in revenues for 2018 if the additional $33,880 is spent for advertising?
5.	If the additional $33,880 is spent, what are the required 2018 revenues for 2018 net income to equal 2017 net income?
6.	At a sales level of 24,000 units, what maximum amount can be spent on advertising if a 2018 net income of $90,402 is desired?