P5-6B Mega Electronix carries no inventories. Its product is manufactured only when a customers order...
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P5-6B Mega Electronix carries no inventories. Its product is manufactured only when a customers order is received. It is then shipped immediately after it is made. For its fi scal year ended October 31, 2017, Megas break-even point was $2.4 million. On sales of $2 million, its income statement showed a gross profi t of $400,000, direct materials cost of $600,000, and direct labor costs of $700,000. The contribution margin was $150,000, and variable manufacturing overhead was $200,000. Instructions (a) Calculate the following: 1. Variable selling and administrative expenses. 2. Fixed manufacturing overhead. 3. Fixed selling and administrative expenses. (b) Ignoring your answer to part (a), assume that fi xed manufacturing overhead was $100,000 and the fi xed selling and administrative expenses were $80,000. The marketing vice president feels that if the company increased its advertising, sales could be increased by 15%. What is the maximum increased advertising cost the company can incur and still report the same income as before the advertising expenditure? (CGA adapted)
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