Revised Sales revenue (1,000 + 150 units = 1,150 * $35) $40,250
Less: Reised Variable costs ($21 + $1 = $22 * 1,150) ($25,300)
Revised Contribution Margin $14,950
Less: Revised Fixed costs ($8,400 + $1,250) ($9,650)
Net operating income $5,300
Fixed costs remain the same for a period of time. Variable costs increase or decrease depending on the performance of the company. Examples of fixed costs are rent, taxes, and insurance premiums.
Variable costs are costs that change with changes in quantity. Examples of variable costs include raw materials, parts labor, production materials, handling charges, shipping charges, packaging materials, and credit card fees. In some fiscal documents, the variable cost of production is called the "cost of goods sold."
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