Herriot Co

question 96

Essay

Herriot Co. has total fixed costs of $180,000 and a contribution margin ratio of 40%. Assume that an additional advertising expenditure of $4,000 would increase sales by $8,000. Should the company spend this additional amount on advertising? (Support your answer with calculations.)

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Definitions:

Consensus

A general agreement or unified opinion among a group of people, often achieved through discussion and collaboration.

Consistency

The quality of always acting or behaving in the same way, leading to predictable and reliable outcomes or performances.

Conditioned Response

A learned reaction to a specific stimulus that occurs after repeated exposure to that stimulus.

Neutral Stimulus

A stimulus that initially produces no specific response other than focusing attention; in conditioning, it becomes associated with an unconditioned stimulus.