Question

Variable costs as a percentage of sales for Lemon Inc. are 74%, current sales are $697,000, and fixed costs are $178,000. How much will operating income change if sales increase by $46,300

Answer 1

Answer:

Effect on income= $12,038 increase

Explanation:

Giving the following information:

Variable costs as a percentage of sales for Lemon Inc. are 74%

How much will operating income change if sales increase by $46,300.

To calculate the effect on income, we need to calculate the increase in total contribution margin:

Total contribution margin change= 46,300*(1-0.74)

Total contribution margin change= $12,038 increase

Effect on income= $12,038 increase