Brown Corporation produces and sells a single product. Data concerning that product appear below: Selling price Per Unit $240 Variable expenses 72 Contribution margin $168 Fixed expenses are $438,000. The company expects to sell 6,000 units in the upcoming period. Browns marketing manager would like to reduce the selling price by $20 and increase the advertising budget by $56,000. The marketing manager predicts that these two changes would increase sales by 1,500 units.

Required:

1. In the spaces provided below, prepare contribution format income statements for the upcoming period for Brown where a) Brown rejects the marketing managers proposal and b) Brown approves the marketing managers proposal. Scenario A Base Case - Brown rejects Proposal Scenario B Brown approves Proposal

2. Based on this analysis, Brown should ____________ (approve or reject) the marketing managers proposal because it ________________(increases or decreases) Net Operating Income by $___________.