Answer:
$8000 (increased)
Explanation:
Given:
Current sales = $600,000
Variable cost = 80% of Sales = $600,000 x 80% = $480,000
Fixed cost = $130,000
Computation of current Operating Income :
= Current sales - Variable cost - Fixed cost
= $600,000 - $480,000 - $130,000
Net Income = -$10,000
Computation of Operating Income(After new sales) :
= New sales - New Variable cost - Fixed cost
= ($600,000 + $40,000) - 80% of ($600,000 + $40,000) - $130,000
= $640,000 - $512,000 - $130,000
Net income after new sales = - $2,000
Change in income = Net income after new sales - Net Income before new sales
= -$2,000 - (-$10,000)
= $8000 (increase)
