Reference no: EM133305889

Tillamook Ice Cream is launching a new marketing campaign for its latest flavor of ice cream (Mini Mochi Munch). Tillamook plans to spend $4.68 million on TV, radio, and print advertising this year for the campaign (this advertising would fall within SG-A expenses). The ads are expected to boost sales of their new flavor by $10.75 million this year and $8.75 million next year. In addition, the company expects that new consumers who try the new flavor will be more likely to try Tillamook's other ice cream flavors. As a result, sales of Tillamook's other products are expected to rise by $3.87 million each year. There will be no new capital expenditure investment associated with this marketing campaign. Tillamook's gross profit margin for the new ice cream flavor is 34%, and its gross profit margin averages 24% for all its other products. The company's marginal corporate tax rate is 33% both this year and next year. What are the incremental earnings associated with this marketing campaign?

Note: You can assume that Tillamook has adequate positive income prior to launching this marketing campaign. So it can take advantage of the tax benefits from any losses that this marketing campaign might generate.