Chaps & Saddles, a retailer of tack and Western apparel, earns an average contribution margin of 30

Question:

Chaps & Saddles, a retailer of tack and Western apparel, earns an average contribution margin of 30 percent on its sales volume. Recently, the advertising manager of a local country radio station offered to run numerous radio advertisements for Chaps & Saddles at a monthly cost of $2,100.

Compute the amount by which the proposed radio advertising campaign must increase Chaps &

Saddles's monthly sales volume to:

a. Pay for itself.

b. Increase operating income by $1,500 per month?

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...