Data for Moorefield Corporation are shown below:

Fixed expenses are $65,000 per month, and the company is selling 2,750 units per month.
Required:
1. The marketing manager argues that a $5,000 increase in the monthly advertising budget would increase monthly sales by $12,000. Should the advertising budget be increased?
2. Refer to the original data. Management is considering using higher-quality components that would increase the variable cost by $4 per unit. The marketing manager believes the higher-quality product would increase sales by 20% per month. Should the higher-quality components be used?

Transcribed Image Text:

Percentage of Sales Per Unit Selling price.... Variable expenses. Contribution margin... 100% 70% $90 63 $27 30%