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11 February, 13:59

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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  1. 11 February, 15:38
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    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
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