Campbell Corporation Developed the Following Income Statement Using a Contribution

Essay

Campbell Corporation developed the following income statement using a contribution margin approach: Campbell Corporation
Projected Income Statement
For the Current Year Ending December 31
$\begin{array}{lr}\text { Sales }&\$750,000\\\text { Less variable costs: }\\\text { Variable manu facturing costs } & \$ 280,000 \\\text { Variable selling costs } & 120,000\\\text { Total variable costs }&\$400,000\\\text { Contribution margin }&\$350,000\\\text { Less fixed costs: }\\\text { Fixed manufacturing costs } & \$ 130,000 \\\text { Fixed selling and } & 80,000\\\text { administrative costs }\\\text { Total fixed costs }&\$210,000\\\text { Operating income }&\$140,000\end{array}$
The projected income statement was based on sales of 100,000 units.Thomas has the capacity to produce 120,000 units during the year.
A. Determine the break-even point in units.
B. The sales manager believes the company could increase sales by 8,000 units if advertising expenditures were increased by $22,000. By how much will income increase or decrease if this plan is put into effect?
C. What is the maximum amount the company could pay for advertising if the sales would really increase by 8,000 units?