A Regional Restaurant Chain Spends $90,000 for a Local Television

question 21

Multiple Choice

A regional restaurant chain spends $90,000 for a local television advertising campaign that delivers $450,000 in incremental revenue. If the incremental contribution margin based on the incremental revenue for this campaign is 75%, then how much would the program return for each additional marketing dollar invested?

• A) $2.70
• B) $3.00
• C) $3.75
• D) $5.00
• E) $7.50

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Definitions:

Revenue Recognized

The point at which a company records the revenues it has earned in its financial statements, according to specific criteria outlining when the earnings process is considered complete.

Sustainable Income

The portion of earnings that can be consistently generated and expected to continue in the future, excluding any unusual or one-time profits or losses.

Transitory Income

Income that is not expected to recur regularly, often affecting financial analysis due to its non-permanent nature.

Earned Income

Income derived from active participation in a business or trade, including wages, salaries, tips, and other compensation for services rendered.