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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.
- Start a new ad campaign that is expected to increase sales revenue by 5 percent.
- 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 given options).
- a. 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 in
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