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Should the company spend this additional amount

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Herriot Company has total fixed costs of $180,000 and a contribution margin ratio of 40%. Assume tht an additional advertising expenditure of $4,000 would increase sales by $8,000. Should the company spend this additional amount on advertising? Explain either a yes or no response and show calculations to support your answer.

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Solution Summary

The solution explains how to decide whether the company spend this additional amount on advertising

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We need to compare the increase in contribution margin due to higher sales against the increase in advertising.
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