Requirement 1. What is the projected net income for 2020?
Using the equation method, select the basic formula used to compute the target net income for 2020.
Revenues - Variable costs - Fixed costs = Target net income / (1 - Tax rate)
The target net income for 2020 is \$ 87,780
Requirement 2. What is the breakeven point in units for 2020?
Determine the formula that is used to compute how many bowls are needed to break even, then compute the number of bowls needed. (Enter
\$ 184,800 / \$ 15.40 = 12,000
Requirement 3. Mr. Ko has set the revenue target for 2021 at a level of \$672,000 (or 24,000 bowls). He believes an additional marketing cost
attain the revenue target. What is the net income for 2021 if the additional \$33,880 is spent and the revenue target is met?
The target net income for 2021 is \$ 90,552
Requirement 4. What is the breakeven point in revenues for 2021 if the additional \$33,880 is spent for advertising? (Do not round any of your
The breakeven point in revenues for 2021 is \$ 397,600
Requirement 5. If the additional \$33,880 is spent, what are the required 2021 revenues for 2021 net income to equal 2020 net income?
Using the basic formula determined in requirement 1, compute the required number of units first, then the required revenue. (Do not round any
The required number of units is 23,700
The required revenue is
Variable cost (per bowl)
Direct materials \$ 3.50
Direct manufacturing labor \$ 7.50
Variable overhead (manufacturing, marketing, distribution and
customer service) \$ 1.60
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%