Question:
The following information pertains to Torasic Company's budgeted income statement for the month of June 2011:
Sales (1,200 units at $250) $300,000
Variable cost 150,000
Contribution margin $150,000
Fixed cost 200,000
Net loss ($50,000)
Required
(a) Determine the company's breakeven point in both units and dollars.
(b) The sales manager believes that a $22,500 increase in the monthly advertising expenses will result in a considerable increase in sales. How much of an increase in sales must result from increased advertising in order to break even on the monthly expenditure?
(c) The sales manager believes that an advertising expenditure increase of $22,500 coupled with a 10% reduction in the selling price will double the sales quantity. Determine the net income (or loss) if these proposed changes are adopted.