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Required information [The following information applies to the questions displayed below.] Hudson Co. reports the contribution margin income statement for 2017. HUDSON CO. Contribution Margin

Required information

[The following information applies to the questions displayed below.]

Hudson Co. reports the contribution margin income statement for 2017.

HUDSON CO.
Contribution Margin Income Statement
For Year Ended December 31, 2017
Sales (10,700 units at $300 each) $ 3,210,000
Variable costs (10,700 units at $240 each) 2,568,000
Contribution margin $ 642,000
Fixed costs 504,000
Pretax income $ 138,000

The marketing manager believes that increasing advertising costs by $98,000 in 2018 will increase the companys sales volume to 12,100 units. Prepare a forecasted contribution margin income statement for 2018 assuming the company incurs the additional advertising costs.

HUDSON CO.
Forecasted Contribution Margin Income Statement
For Year Ended December 31, 2018
Sales
Variable costs
Contribution margin
Fixed costs
Income (pretax)
Should the company incur the additional advertising costs?

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