Homework Answers
Answer:
Correct answer is:
$333,333
Explanation:
Given:
For every $1 in sales, Acme Corporation has $0.85 in variable cost.
Hence:
Contribution margin ratio = (1 - 0.85) / 1 * 100 = 15%
Marketing cost to be incurred = $25,000
ROMI required = 100%
Target incremental income required = 25000 * 100% = $25,000
Hence:
Incremental revenue required to achieve 100% ROMI = (Incremental fixed cost + Incremental income) / Contribution margin ratio
= (25000 + 25000) / 15%
= $333,333.33
Hence option C is correct and other options A, B, D and E are incorrect.
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