Suppose a firm with a contribution margin ratio of 0.3 increased its advertising expenses by $10,000 and

Question:

Suppose a firm with a ratio of 0.3 increased its advertising expenses by $10,000 and found that sales increased by $30,000. Was it a good decision to increase advertising expenses? Why is this simple problem an important one for business people to understand?

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...