Question
Hudson Co. reports the contribution margin income statement for 2017. HUDSON CO. Contribution Margin Income Statement For Year Ended December 31, 2017 Sales (9,900 units
Hudson Co. reports the contribution margin income statement for 2017.
| HUDSON CO. | |||
| Contribution Margin Income Statement | |||
| For Year Ended December 31, 2017 | |||
| Sales (9,900 units at $225 each) | $ | 2,227,500 | |
| Variable costs (9,900 units at $180 each) | 1,782,000 | ||
| Contribution margin | $ | 445,500 | |
| Fixed costs | 342,000 | ||
| Pretax income | $ | 103,500 | |
Assume the company is considering investing in a new machine that will increase its fixed costs by $42,000 per year and decrease its variable costs by $9 per unit. Prepare a forecasted contribution margin income statement for 2018 assuming the company purchases this machine.
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If the company raises its selling price to $240 per unit. 1. Compute Hudson Co.'s contribution margin per unit. 2. Compute Hudson Co.'s contribution margin ratio. 3. Compute Hudson Co.'s break-even point in units. 4. Compute Hudson Co.'s break-even point in sales dollars.
The marketing manager believes that increasing advertising costs by $84,000 in 2018 will increase the companys sales volume to 11,300 units. Prepare a forecasted contribution margin income statement for 2018 assuming the company incurs the additional advertising costs.
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