At its present level of operations,a small manufacturing firm has total variable costs equal to 75 percent of sales and total fixed costs equal to 15 percent of sales.Based on variable costing,if sales change by $1.00,income will change by
A)$0.25.
B)$0.10.
C)$0.75.
D)can't be determined from the information given.

Question

Quizplus · Accepted Answer

Based on variable costing, the income change is determined by the contribution margin, which is sales minus variable costs. Here, if sales change by $1.00 and variable costs are 75% of sales, the income changes by $1.00 - $0.75 = $0.25. Fixed costs do not affect the calculation in variable costing for a change in sales.

At Its Present Level of Operations,a Small Manufacturing Firm Has