Blistre Company operates on a contribution margin of 30 % and currently has fixed costs of $ 510 comma 000. Next year, sales are projected to be $ 3 comma 100 comma 000. An advertising campaign is being evaluated that costs an additional $ 110 comma 000. How much would sales have to increase to justify the additional expenditure? A. $ 366 comma 667 B. $ 930 comma 000 C. $ 510 comma 000 D. $ 256 comma 667

Question

Clara Bautista

Business

22 December, 08:01

Blistre Company operates on a contribution margin of 30 % and currently has fixed costs of $ 510 comma 000. Next year, sales are projected to be $ 3 comma 100 comma 000. An advertising campaign is being evaluated that costs an additional $ 110 comma 000. How much would sales have to increase to justify the additional expenditure? A. $ 366 comma 667 B. $ 930 comma 000 C. $ 510 comma 000 D. $ 256 comma 667

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Answers (1)

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Jacquelyn Mcdonald · Answer 1

A. $366,667

Explanation:

Provided that,

Contribution margin = 50%

Fixed cost = $510,000

Next year sales = $3,100,000

Additional cost = $110,000

By considering this above information, the increase in sales value would be

= Additional fixed cost : contribution margin

= $110,000 : 30%

= $366,667

Simply we divided the additional fixed cost by the contribution margin so that accurate value can come