Blossom Footwear Co. produces high-quality shoes. To prepare for next year’s marketing campaign, the company’s controller has prepared the following information for the current year, 2022:
Variable costs (per pair of shoes) Direct materials $37
Direct manufacturing labour 17
Variable overhead (manufacturing, marketing, distribution, customer
service, and administration) 19
Total variable costs $73
Fixed costs Manufacturing $2,500,000
Marketing, distribution, and customer service 450,000
Administrative 700,000
Total fixed costs $3,650,000
Selling price per pair of shoes $173
Expected revenues, 2022 (50,000 units) $8,650,000
Income tax rate 40%
The company controller has set the revenue target for 2023 at $9,515,000 (or 55,000 pairs). He believes an additional marketing cost of $400,000 for advertising in 2023, with all other costs remaining constant, will be necessary to attain the revenue target. Calculate the operating income for 2023 if the additional $400,000 is spent and the revenue target is met.
Operating income $enter the operating income in dollars