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Arrow Products typically earns a contribution margin ratio of 25 percent and has current fixed costs of $80,000. Arrow's general manager is considering spending an
Arrow Products typically earns a contribution margin ratio of 25 percent and has current fixed costs of $80,000. Arrow's general manager is considering spending an additional $20,000 to do one of the following: 1. Start a new ad campaign that is expected to increase sales revenue by 5 percent. 2. License a new computerized ordering system that is expected to increase Arrow's contribution margin ratio to 30 percent. Sales revenue for the coming year was initially forecast to equal $1,200,000 (that is, without implementing either of the above options a-1. Compute the projected operating income for each option? a-2. For each option, how much will projected operating income increase or decrease relative to initial predictions? b. By what percentage would sales revenue need to increase to make the ad campaign as attractive as the ordering system? Complete this question by entering your answers in the tabs below. Req A1 Req A2 Req B Compute the projected operating income for each option? Operating Income Ad campaign Ordering system Al Req A2 > 1. Start a new ad campaign that is expected to increase sales revenue by 5 percent.. 2. License a new computerized ordering system that is expected to increase Arrow's contribution margin ratio to 30 percent. Sales revenue for the coming year was initially forecast to equal $1,200,000 (that is, without implementing either of the above options a-1. Compute the projected operating income for each option? a-2. For each option, how much will projected operating income increase or decrease relative to initial predictions? b. By what percentage would sales revenue need to increase to make the ad campaign as attractive as the ordering system? Complete this question by entering your answers in the tabs below. Req A1 Req A2 Req B For each option, how much will projected operating income increase or decrease relative to initial predictions? The projected operating income will If the ad campaign is chosen. The projected operating income will by if the ordering system is chosen. Arrow Products typically earns a contribution margin ratio of 25 percent and has current fixed costs of $80,000. Arrow's general manager is considering spending an additional $20,000 to do one of the following: 1. Start a new ad campaign that is expected to increase sales revenue by 5 percent. 2. License a new computerized ordering system that is expected to increase Arrow's contribution margin ratio to 30 percent. Sales revenue for the coming year was initially forecast to equal $1,200,000 (that is, without implementing either of the above option a-1. Compute the projected operating income for each option? a-2. For each option, how much will projected operating income increase or decrease relative to initial predictions? b. By what percentage would sales revenue need to increase to make the ad campaign as attractive as the ordering system? Complete this question by entering your answers in the tabs below. Req A1 Req A2 Req B Dy what percentage would sales revenue need to increase to make the ad campaign as attractive as the ordering system? Percentage increase %
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