The Value of Bonuses Oscar's Outdoor Signage employs salesmen to find new advertisers for existing signs. In an average month, salaried sales staff can keep 80 of 100 signs under contract in a given month. When Oscar experimented with a bonus of $100

for each sign under contract this was increased to 90 of 100 signs. How large must the contribution margin on a sign be to make it profitable to offer the bonuses?

Oscar paid $100×90= $9,000 in bonuses to a sales staff member and increased the number under contract by 10 . This, comes to $9,000/10 = $900 per additional sign under contract. These bonuses are profitable if the contribution margin on a sign exceeds $900 per month.