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Prepare a forecasted contribution margin income statement

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Reference no: EM132315625

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. 

Contribution margin

 

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

 

Contribution margin

 

Fixed costs

 

Income (pretax)

 

Should the company incur the additional advertising costs?

 

Reference no: EM132315625

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