How much additional revenue must be generated to justify an advertisement costing $500, given a variable cost percentage of 55%.

Question

Quizplus · Accepted Answer

The additional revenue needed to justify the $500 advertisement cost can be calculated using the formula: additional revenue = advertisement cost / (1 - variable cost percentage). Here, it's $500 / (1 - 0.55) = $500 / 0.45 = $1,111.11. Therefore, the revenue must be more than $1,111 to cover the advertisement cost and the variable costs.

How Much Additional Revenue Must Be Generated to Justify an Advertisement