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14 January, 08:38

The marketing manager believes that increasing advertising costs by $74,000 in 2020 will increase the company's sales volume to 12,700 units. Prepare a forecasted contribution margin income statement for 2020 assuming the company incurs the additional advertising costs.

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  1. K
    14 January, 11:50
    0
    Instructions are below.

    Explanation:

    Giving the following information:

    The marketing manager believes that increasing advertising costs by $74,000 in 2020 will increase the company's sales volume to 12,700 units.

    We weren't provided with enough information to solve the requirement. But, I will provide the general structure:

    Sales = (number of units*selling price per unit) =

    Total variable cost = (total variable cost per unit*number of units) =

    Contribution margin=

    Fixed costs = (fixed costs + incremental fixed costs) =

    Net operating income

    If we want to determine the effect on income without an income statement:

    Effect of income = incremental units*contribution margin - incremental fixed costs

    Contribution margin = selling price - unitary variable cost
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