HUDSON CO. Contribution Margin Income Statement For Year Ended December 31, 2017

Question

HUDSON CO. Contribution Margin Income Statement For Year Ended December 31, 2017 Sales (11,500 units at $225 each) Variable costs (11,500 units at $180 each) Contribution margin Fixed costs Pretax income $2,587,500 2,070,000 $ 517,500 360,000 $157,500 The marketing manager believes that increasing advertising costs by $123,000 in 2018 will increase the company's sales volume to 12,900 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?

Explanation / Answer

HUDSON CO.

Forecasted Contribution Margin Income Statement

For Year Ended December 31, 2018

Sales(12,900 * $225) $2,902,500 Variable costs(12,900 * $180) $2,322,000 Contribution margin $580,500 Fixed costs $483,000 Income (pretax) $97,500

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