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Kokomochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch
Kokomochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch. Kokomochi plans to spend 56.7 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 57.6 milion this year and 55.6 milion next year. In addition, the company expects that consumers who Wy the Mini Mod Munch wil be more likely to try Kokomoch's other products. As a result, sales of other products are expected to rise by $1.6 milion each year, Kokomochogrom proft margin for the Mini Mochi Munch is 32%, and its grows profit margin averages 20% for other products. The company's marginal corporate tax rate is both this year and next yea What are the incremental caring associated with the advertising campaign? Complete the table below: (Round by the nearest dollar) Year 1 Incremental Earnings Forecast Sales of Mini Mochi Munch Other Sales Cost of Goods Sold Gross Profit Selling General, and Admin Expenses Depreciation $ $ $ $ $ EBIT Income tax at 35% Unlevered Net Income
Expert Solution
| Incremental Earnings Forecast | Year 1 | Year 2 |
| Sales of Mini Mochi Munch | $ 7,600,000 | $ 5,600,000 |
| Other sales | $ 1,600,000 | $ 1,600,000 |
| Cost of goods sold [ Balancing figure ] | $ (6,448,000) | $ (5,088,000) |
| Gross profit | $ 2,752,000 | $ 2,112,000 |
| Selling, general, and Admin. Expenses | $ 5,700,000 | $ - |
| Depreciation | $ - | $ - |
| EBIT | $ 8,452,000 | $ 2,112,000 |
| Income tax at 35% | $ (2,958,200) | $ (739,200) |
| Unlevered Net income | $ 5,493,800 | $ 1,372,800 |
| Gross profit of year 1 = ( 7600000 * 32% ) + ( 1600000 * 20% ) = | 2752000 |
| Gross profit of year 2 = ( 5600000 * 32% ) + ( 1600000 * 20% ) = | 2112000 |
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