Question

Suppose sales increase by 20 percent next month. Calculate the effect that increase will have on her profit. (Round your intermediate calculations to 2 decimal places. Round your final answer to 1 decimal place. (i.e. .123 should be entered as 12.3%))

Answer 1

Answer:

26.50%

Explanation:

Note: The full question is attached below

Contribution margin = Sales - Variable expenses

Contribution margin = $31 - $15

Contribution margin = $16

                                          Current          Proposed

Contribution margin         $6,080             $7,296

                                         ($16*380)       (6080*$1.2)

Fixed Cost                         ($1,490)            ($1,490)

Net operating income      $4,590            $5,806

Increase in profit = ($5,806 - $4,590) / $4,590

Increase in profit = 0.2649237

Increase in profit = 26.50%