1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Artyom0805 [142]
3 years ago
13

Kokomochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch. Kokomochi p

lans to spend $4.13 million on TV, radio, and print advertising this year for the campaign. The ads are expected to boost sales of the Mini Mochi Munch by $8.31 million this year and by $6.31 million next year. In addition, the company expects that new consumers who try the Mini Mochi Munch will be more likely to try Kokomochi’s other products. As a result, sales of other products are expected to rise by $2.38 million each year.
Kokomochi’s gross profit margin for the Mini Mochi Munch is 35%, and its gross profit margin averages 25% for all other products. The company’s marginal corporate tax rate is 35% both this year and next year. What are the incremental earnings associated with the advertising campaign?
YEAR 1
Incremental Earnings Forecast ($ million)
Sales of Mini Mochi Munch $ ?????
Other Sales $ ?????
Cost of Goods Sold $ ?????
Gross Profit $ ?????
Selling, General, and Administrative $ ?????
Depreciation $ ?????
EBIT $ ?????
Income Tax at 35% $ ?????
Unlevered Net Income $ ?????
Calculate the unlevered net income for year 2 below:
YEAR 2
Sales of Mini Mochi Munch $ ?????
Other Sales $ ?????
Cost of Goods Sold $ ?????
Gross Profit $ ?????
Selling, General, and Administrative $ ?????
Depreciation $ ?????
EBIT $ ?????
Income Tax at 35% $ ?????
Unlevered Net Income $ ?????
Business
1 answer:
kolbaska11 [484]3 years ago
8 0

Answer:

Kokomochi

YEAR 1

Incremental Earnings Forecast ($ million)

Sales of Mini Mochi Munch                   $8,310,000

Other Sales                                           $2,380,000

Other sales revenue                           $10,690,000

Cost of Goods Sold                               $7,186,500

Gross Profit                                           $3,503,500

Selling, General, and Administrative    $4,130,000

Depreciation                                         $0

EBIT                                                       ($ 626,500)

Income Tax at 35%                               $0

Unlevered Net Income                         $0

Calculate the unlevered net income for year 2 below:

YEAR 2

Sales of Mini Mochi Munch                   $6,310,000

Other Sales                                           $2,380,000

Total sales revenue                              $8,690,000

Cost of Goods Sold                              $5,886,500

Gross Profit                                           $2,803,500  

Selling, General, and Administrative   $ 0

Depreciation                                         $0

EBIT                                                       $2,803,500

Income Tax at 35%                                  $981,225

Unlevered Net Income                         $1,822,275

Explanation:

a) Data and Calculations:

Advertising campaign expenses = $4.13 million

Incremental sales revenue from Mini Mochi Munch = $8.31 million

Next years incremental sales revenue from Mini Mochi Munch = $6.31 million

Incremental sales revenue from other products = $2.38 million each year

Gross profit margin or the Mini Mochi Munch = 35%

Gross profit margin for other products = 25%

Marginal corporate tax rate = 35%

Cost of goods sold:

Year 1:

Mini Mochi Much = 65% (100 - 35%) of sales = 65% * $8.31 m = $5,401,500

Other products = 75% (100 - 25%) of sales = 75% * $2.38 m =   $1,785,000

Total cost of goods sold = $7,186,500

Year 2:

Mini Mochi Much = 65% (100 - 35%) of sales = 65% * $6.31 m = $4,101,500

Other products = 75% (100 - 25%) of sales = 75% * $2.38 m =   $1,785,000

Total cost of goods sold = $5,886,500

b) The company will incur a loss in the first year, which will be recovered by the second year's profit, because advertising expense are not capitalized or spread over the two years.

You might be interested in
Edington Electronics Inc. produces and sells two models of pocket calculators, XQ-103 and XQ-104. The calculators sell for $14 a
iren2701 [21]

Answer:

In the question, we are not given information with respect to sales costs, so we can only find total gross sales:

Sales Budget fist 2 quarters of the year

Product  Sales Price  Sales Q1 Sales Q2  Total gross sales

XQ-103     $14             22,590    27,710      $704,200

XQ-104     $27             14,880    16,200      $839,160

                                                                     $1,53,360

4 0
2 years ago
The aggregate demand curve shows the relationship between inflation the price level the money supply interest rates and producti
victus00 [196]

Answer:

The correct answer is option a.

Explanation:

The aggregate demand curve shows the demand for goods and services by the economy as a whole. It comprises of consumption expenditure, government expenditure, investment expenditure, and net exports.  

The aggregate demand curve in the short run is downward sloping because an increase in the price level reduces the real money holdings. It reduces purchasing power. So the amount of expenditures gets reduced as well.

3 0
2 years ago
Due to the credit crunch during the recent recession, many small businesses found that _____________ were more willing to lend m
ivann1987 [24]
Most of the small business found that small, community banks were more willing to lend money to small operations, it is due to the credit crunch during the recent recession. The community banks are more willing to help the small businesses to gain again their capital or investment.
8 0
3 years ago
Read 2 more answers
CureAll, a pharmaceutical company, develops a new drug to treat restless legs syndrome. An experiment to test the drug's efficac
adoni [48]

Answer:

double-blind experiment

Explanation:

A double-blind experiment is one in which both the experimenter and the subjects don't have knowledge of which treatment is given to which participant.

The aim of this method is to avoid bias especially from demand characteristics (experimenter expectation) and placebo effect (perception of benefit from an ineffective substance).

Double-blind experiment is used when CureAll develops a new drug to treat restless legs syndrome, and test the drug's efficacy is designed in such a way that neither the experimenter administering the drug or participants knows which drug is administered.

4 0
3 years ago
Merchandise with a sales price of $5,000 is sold on account with terms 2/10, n/30. The journal entry to record the sale would in
Savatey [412]

Answer:

Debit to sales discounts for $100

Explanation:

Please see journal entry to record the sales below;

a. Dr accounts receivable $5,00

To sales revenue account $5,000

(Being merchandise that is sold on credit basis)

Suppose payment is made within 10 days, the journal entry will be;

Dr Cash account $4,900

Sales discount account $100

(5,000 × 2%)

To accounts receivable $5,000

(Being cash that is received)

8 0
3 years ago
Other questions:
  • Erik is an investor with $5,000 available for investment. He has the following three investment possibilities from which to choo
    6·1 answer
  • Harris Company manufactures and sells a single product. A partially completed schedule of the company’s total costs and costs pe
    14·1 answer
  • Suppose that goods x and y are substitutes and the price of good y falls. we would then expect
    10·1 answer
  • Direct materials are $15 per unit; direct labor is $7 per unit and variable overhead costs are $2 per unit. If total product cos
    15·1 answer
  • Hardy lumber has a capital structure that includes bonds, preferred stock, and common stock. which one of the following rights i
    5·1 answer
  • Peters, Chong, and Aaron are dissolving their partnership. Their partnership agreement allocates each partner an equal share of
    9·1 answer
  • A buyer failed to take advantage of the vendor's credit terms of 2/10, n/45, but instead paid the invoice in full at the end of
    14·1 answer
  • 1<br> Which one of the following does not vary with output in the short-run?<br> А<br> Total revenue<br> B<br> Total costs<br> с
    7·2 answers
  • Not yet answered Marked out of 1.00 Flag question The accounting records of Slattery Corporation, a small manufacturing company,
    14·1 answer
  • Which of the following people would not likely have an insurable interest in a
    5·2 answers
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!