Question

The next two questions refer to the following fictional financial statement from Sharpie Markers, who sells their markers directly to consumers for $2/marker.
Revenue: $500,000
Plastic: $200,000
Ink: $1,000
Advertising: $5,000
Overhead: $1,000
Depreciation: $25
How many additional pens would Sharpie have to sell to maintain their current contribution to the organization if they invest $25,000 in advertising?
A. None of the above, but I could calculate this with the information I am given.
B. 20,904
C. 836
D. 21,259

Answer 1

Answer:

B. 20,904

Explanation:

For computing the additional pens first we have to determine the contribution per unit which is shown below:

Revenue $500,000

Less: Plastic cost -$200,000

Less: ink cost -$1,000

Contribution margin $299,000

Divided by Number of units sold ($500,000 ÷ $2) $250,000

Contribution per unit $1.196

Now the additional pens required is

= $25,000 ÷ $1.196

= $20,904