Markham Company has a contribution margin ratio of 25%.The company is considering a proposal that will increase sales by $150,000.What increase in profit can be expected assuming total fixed costs increase by $25,000? (Do not round your intermediate calculations. )
A) $6,250
B) $31,250
C) $37,500
D) $12,500

Question

Quizplus · Accepted Answer

Sales - Variable costs - Fixed costs = Profit
Contribution margin - Fixed costs = Profit
($150,000 x 0.25)- $25,000 = $12,500

Markham Company Has a Contribution Margin Ratio of 25