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Information for Drone On Limited is shown below:
Per Unit Percentage of Sales
Selling price $1,200 100%
Variable expenses 900 75%
Contribution margin $300 25%
Total fixed expenses are $35,000 per month, and the company is selling 1,600 drones per month.
Required:
Problem 1. The marketing manager argues that a $5,300 increase in the monthly budget to prepare webinars would increase monthly sales by 50 drones. Should the webinar budget be increased?
Problem 2. Refer to the original data. Management is considering using higher-quality components that would increase the variable cost by $90 per unit. The marketing manager believes the higher-quality product would increase sales by 30% per month. Should the higher-quality components be used?
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