Information for Drone On Limited is shown below:

Total fixed expenses are $100,000 per month, and Drone On Limited is selling 1,000 drones per month.

Required:
1. The marketing manager argues that a $5,000 increase in the monthly budget to prepare webinars would increase monthly sales by 50 drones. Should the webinar budget be increased?

2. Refer to the original data. Management is considering using higher-quality components that would increase the variable cost by $80 per unit. The marketing manager believes the higher-quality product would increase sales by 15% per month. Should the higher-quality components be used?

Transcribed Image Text:

Per Unit Percentage of Sales Selling price . . .. Variable expenses Contribution margin . .. $1,000 100% 80% 800 $ 200 20%