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Question :
[The following information applies to the questions displayed below] Hudson Co. reports the contribution margin income statement for 2017.HUDSON CO.
Contribution Margin Income Statement For Year Ended December 31, 2017
Sales (11,000 units at $300 each)
$3,300,000
Variable costs (11,000 units at $240 each)
2,640,000
Contribution margin
$ 660,000
Fixed costs
360,000
Pretax income
$ 300,000
If the company raises its selling price to $320 per unit.
1. Compute Hudson Co.'s contribution margin per unit.
2. Compute Hudson Ca's contribution margin ratio.
3. Compute Hudson Co.'s break-even point in units.
4. Compute Hudson Co.'s break-even point in sales dollar
1.
per unit
.
2.
Contribution margin ratio
'
%
3.
Break-even point
..
units
4.
Break-even sales dollars
The marketing manager believes that increasing advertising costs by $125,000 in 2018 will increase the company's sales volume to 12,400 units. Prepare a forecasted contribution margin income statement for 2018 assuming the company incurs the additional advertising costs.
HUDSON CO.
Forecasted Contribution Margin Income Statement
For Year Ended December 31, 2018
Sales
Variable costs
Income (pretax)
Should the company incur the additional advertising costs?
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