What is the sales level in dollars required to equal year

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Eagle Company makes the MusicFinder, a sophisticated satellite radio. Eagle has experienced a steady growth in sales for the past five years. However, Ms. Luray, Eagle's CEO, believes that to maintain the company's present growth will require an aggressive advertising campaign next year. To prepare for the campaign, the company's accountant, Mr. Bednarik, has prepared and presented to Ms. Luray the following data for the current year, year 1: Variable costs: Direct labor (per unit) $ 90 Direct materials (per unit) 44 Variable overhead (per unit) 13 Total variable costs (per unit) $ 147 Fixed costs (annual): Manufacturing $ 387,000 Selling 281,000 Administrative 795,000 Total fixed costs (annual) $ 1,463,000 Selling price (per unit) 416 Expected sales revenues, year 1 (23,000 units) $ 9,568,000 Eagle has an income tax rate of 35 percent. Ms. Luray has set the sales target for year 2 at a level of $10,816,000 (or 26,000 radios). d. What will be the break-even point in sales dollars for year 2 if the firm spends the additional $289,000 for advertising? (Solve by computing volume in units first. Round up units to the nearest whole number.) e. If the firm spends the additional $289,000 for advertising in year 2, what is the sales level in dollars required to equal the year 1 after-tax operating profit? (Solve by computing volume in units first. Round up units to the nearest whole number.)

Reference no: EM131220537

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