per unit 337681

B.T. Hernandez Company, maker of high quality flashlights, has experienced steady growth over the last 6 years. However, increased competition has led Mr. Hernandez, the president, to believe that an aggressive campaign is needed next year to maintain the company’s present growth.The company’s accountant has presented Mr. Hernandez with the following data for the current year, 2010, for use in preparing next year’s advertising campaign. Cost Schedules Variable costs Direct labor per flashlight $ 8.00 Direct materials 4.00 V ariable overhead 3.00 V ariable cost per flashlight $15.00 Fixed costs Manufacturing $ 25,000 Selling 40,000 Administrative 70,000 Total fixed costs $135,000 Selling price per flashlight $25.00 Expected sales, 2010 (20,000 flashlights) $500,000 Mr. Hernandez has set the sales target for the year 2011 at a level of $550,000 (22,000 flashlights). Instructions (Ignore any income tax considerations .) (a) What is the projected operating income for 2010? (b) What is the contribution margin per unit for 2010? (c) What is the break even point in units for 2010? (d) Mr. Hernandez believes that to attain the sales target in the year 2011, the company must incur an additional selling expense of $10,000 for advertising in 2011, with all other costs remaining constant. What will be the break even point in dollar sales for 2011 if the company spends the additional $10,000? (e) If the company spends the additional $10,000 for advertising in 2011, what is the sales level in dollars required to equal 2010 operating income?