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    CVP calculations

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    Anthony Industries
    Income Statement
    for year ending December 31, 2009

    revenues $750,000
    variable costs:
    Variable manufacturing costs $280,000
    variable selling costs 120,000
    Total variable costs 400,000
    Contribution margin $350,000

    Fixed costs:
    Fixed manufacturing costs $130,000
    Fixed selling & other costs 80,000
    Total fixed costs 210,000
    Net Income $140,000


    1)determine the break even point in units. The company has a capacity of 150,000 units and is currently at two thirds of its capacity.

    2) the sales manager believes the company could increase sales by 8,000 units if advertising expenditures are increased by $22,000. Determine the effect on income if the company increases advertising expenses as suggested by the sales manager.

    3) what is the maximum amount the company could pay for advertising if the advertising would increase sales by 8,000 units?

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    Solution Preview

    1. Breakeven units = Fixed cost/unit contribution margin
    Total units = 150,000 X 2/3 = 100,000
    Total contribution margin = 350,000
    Unit ...

    Solution Summary

    The solution explains some calculations using CVP concepts