How much will Square Yard Products Inc.'s total income from operations increase?

Question

Quizplus · Accepted Answer

Based on the given information, a 20% increase in sales revenue will result in a $80,000 increase in income from operations. To calculate this, we can use the following equation:
Increase in income = Increase in sales revenue x Contribution margin ratio
The contribution margin ratio is the percentage of each dollar of sales that contributes to income from operations, and we are given that it is 40%. So, the calculation is:
Increase in income = (20% x $1,000,000) x 40%
Increase in income = $200,000 x 0.4
Increase in income = $80,000
Therefore, the best choice is C) $80,000.

How Much Will Square Yard Products Inc