Final answer:
The firm's accounting profit last year was $50,000. To find the sales level required in year 2 to match year 1's after-tax operating profit with the additional advertising cost, we would need the after-tax profit figure and other financial details, which are not provided.
Step-by-step explanation:
Calculating Accounting Profit and Sales Level Required
To calculate the firm's accounting profit from last year, we need to subtract the explicit costs (labor, capital, materials) from the total revenues. The calculation is as follows: $1,000,000 (sales revenue) - ($600,000 (labor) + $150,000 (capital) + $200,000 (materials)) = $50,000 accounting profit.
Now, regarding the additional advertising expense in year 2, we first need to know the after-tax operating profit from year 1. Assuming we have this value, we would then add the $293,000 advertising expense to get the new break-even point. But to determine the exact sales level required, we would also need to know the tax rate and any change to other expenses or the cost structure in year 2. Without these specifics, a precise answer cannot be provided.
If the operating profit is maintained and only the advertising cost increases, then the new sales level in dollars would be: Required Sales = Year 1 Profit + Additional Advertising Cost. However, this simplified equation does not take tax into effect, which would reduce the operating profit, thereby increasing the required sales level to break even.