Answer:
Explanation:
1. What is the company’s contribution margin (CM) ratio?
= sales - variable cost/ sales
= $315,000 - $239,400/$315,000
= $75,600/$315,000
= 0.24 x 100
= 24%
2. What is the estimated change in the company’s net operating income if it can increase total sales by $1,100?
Net operating income
= sales - variable cost - fixed cost
= $315,000 - $239,400 - $39,000
= $36,600
Change in operating income
= $316,100 - $239,400 - 39,000
= $37,700
Contribution margin ratio
= $316,600 - $239,400/316,600
= $77,200/$316,600
= 0.24 x 100
= 24%
Estimated change
=Change in total sales x CMR
= $1,100 x 24%
= $264
