Simple Manufacturing is conducting an analysis during June 2015 to determine how to increase the sales next month during July 2015. Simple Manufacturing only produces one product that sells for $1,200. Variable cost per product is $575 and fixed cost is expected to be $120,000 in July 2015. Simple expects to sell 7,500 units during July.
Required:
Determine the operating income (net income)?
Assume now that, based on their analysis, Simple plans to increase the advertising expense (fixed cost) by $25,000 during July 2015. Simple expects that sales will increase during July 2015 as a result of the increase in advertising expenses. How much does sales in units and dollars need to increase to cover the increase in fixed costs and to also maintain the operating income calculated in requirement 1?