Paradise Burger\'s management is considering a special advertising campaign duri

ID: 2365927 • Letter: P

Question

Paradise Burger's management is considering a special advertising campaign during broadcast coverage of a major sporting event. Management has determined that based on the expense of the advertising campaign, $28,000, only one division can be featured. In-house marketing studies suggest that the campaign could increase sales of the cheeseburgers division by $100,000 or increase sales of the chiliburger division by $75,000.

Required

Which product should be featured in the campaign?

Why?

The input in the box below will not be graded, but may be reviewed and considered by your instructor.

Contribution Margin Ratio Cheeseburgers: % Chiliburgers: %

Explanation / Answer

Additional Sales

100000

75000

Additional Contribution

100000*.26 = 26000

75000*.40=30000

Additional Costs

28000

Net result

-2000

2000

Thus, Chiliburgers should be preferred.

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