Answer:
1. the net income if selling price increased by 10% would be = $59,700
Net income increased by $31,500.
Explanation:
Given,
Sales = $315,000
Variable costs = $216,000
Fixed costs = $70,800
No. of units = 5,000
Sheffield Company
Income Statement (Contribution Margin Format)
Particulars $
Sales 315,000
Less: Variable expenses <u> (216,000)</u>
Contribution Margin 99,000
Less: Fixed costs <u> (70,800)</u>
Net Income 28,200
Since the selling price increased by 10% and no change in variable costs and volume, therefore, we can get -
<em>Sales = $315,000 x (1 + 0.10) = $346,500</em>
In this case, the net income will be as follows:
Sales = $346,500
<u>Less: Variable Costs = (216,000)</u>
Contribution Margin = 130,500
<u>Less: Fixed Costs = (70,800)</u>
Net Income = 59,700
