What is the projected profit, break even and new projected profit.

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The Mayaro Company, a manufacturer of plastic bowls, has experienced tremendous growth over the last year. This has led to the emergence of multiple competitors. Mr. Khan the CEO of the Mayaro company, believes that a massive marketing campaign is required to maintain the company’s growth in the year 2017. To prepare for the campaign the company’s cost accountant has provided the following information to Mr. Khan.

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Variable Cost per bowl:

Direct labour $ 8.00

Direct Materials $3.25

Variable production costs $ 2.50

Fixed costs:

Manufacturing $25,000

Marketing $ 20,000

Distribution and customer service $ 20,000

Administrative $ 70,000

Estimated Selling price per bowl for 2017 $ 25.00

Budgeted sales volume (2017) 20,000 bowls

Required:

  • What is the projected profit for 2017?
  • What is the breakeven point in units for 2017?
  • What will be the new projected profit, if the budget sales volume is changed to 22,000 bowls and there is an additional marketing cost of $ 11,250? For this scenario, what will be the breakeven in units and in revenues?
  • At a sales volume of 22,000 bowls, what is the maximum amount that should be spent on marketing to ensure a profit of $ 60,000?
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