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Torasic Company's budget income statement

The following information pertains to Torasic Company's budget income statement for the month of June 2006.

Sale (1,200 units at $250) $ 300,000
Variable Cost $ 150,000
Contribution Margin $ 150,000
Fixed Cost $ 200,000

Net Loss ($50,000)

Determine the company's breakeven point in both units and dollars.

The sales manager believes that a $22,500 monthly advertising expense will result in a considerable increase in sales. How much of an increase in sales must result from increased advertising in order to break even on the monthly expenditure?

The sales manager believes that an advertsing expenditure increase of $22,500 coupled with a 10% reduction in the selling price will double the sales quantity. Determine the net income ( or loss) if these proposed changes are adopted.

Solution Preview

The following information pertains to Torasic Company's budget income statement for the month of June 2006.

Sale (1,200 units at $250) $ 300,000
Variable Cost $ 150,000
Contribution Margin $ 150,000
Fixed Cost $ 200,000

Net Loss ($ 50,000)

Determine the company's breakeven point in both units and dollars.

Breakeven point in units = Total Fixed Cost/Contribution ...

Solution Summary

This solution is comprised of a detailed explanation to determine break even point and net income.

$2.19