Hudson Co. reports the contribution margin income statement for 2015. Assume sales and variable costs per unit remain constant.

HUDSON CO.
Contribution Margin Income Statement
For Year Ended December 31, 2015
Sales (8,600 units at $225 each)	$	1,935,000
Variable costs (8,600 units at $180 each)		1,548,000
Contribution margin	$	387,000
Fixed costs		315,000
Pretax income	$	72,000

The marketing manager believes that increasing advertising costs by $71,000 in 2016 will increase the companys sales volume to 10,000 units. Prepare a forecasted contribution margin income statement for 2016 assuming the company incurs the additional advertising costs.

HUDSON CO.

Forecasted Contribution Margin Income Statement

For Year Ended December 31, 2016

Sales

Variable costs

Contribution margin

Fixed costs

Income (pretax)

Should the company incur the additional advertising costs?