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

Question:

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

Kokomochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch. Kokomochi plans to spend $4.8 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 $8.5 million this year and $6.5 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 $2.4 million each year. Kokomochi's gross profit margin for the Mini Mochi Munch is 32 % , and its gross profit margin averages 20 % for all other products. The company's marginal corporate tax rate is 35 % both this year and next year. What are the incremental eamings associated with the advertising campaign? Complete the table below: (Round to the nearest dollar) Incremental Earnings Forecast Year 1 Sales of Mini Mochi Munch $ Other Sales S Cost of Goods Sold Gross Profit $ Selling, General, and Admin. Expenses 0 Depreciation EBIT S S Income tax at 35 % Unlevered Net Income

Answers

Incremental earnings forecast. year I sales of Mini Mochi Munch. $8.5 millions other sales $2.4 m. cost of goods sold. ($ 7.7

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