Question: 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

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 (9,900 units at $225 each) Variable costs (9,900 units at $180 each) $ 2,227,500 1,782,000 Contribution margin Fixed costs $ 445,500 326,700 Pretax income $ 118,800 The marketing manager believes that increasing advertising costs by $84,000 in 2016 will increase the company's sales volume to 11,300 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? Yes No
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