The following income statement was produced when volume of sales was at 400 units. $\begin{array}{lrr}
\text { Sales Revenue } &\$2,000\
\text { Variable Cost } &\underline{1,200}\
\text { Contribution Margin} &\$800\
\text { Fixed Cost} &\underline{300}\
\text { Net Income } &\underline{\$500}\
\end{array}$
If volume reaches 500 units,net income will be:
A) $625
B) $1,800
C) $700
D) None of these

Question

The following income statement was produced when volume of sales was at 400 units. $\begin{array}{lrr}
  \text {  Sales Revenue } &\$2,000\
 \text {  Variable Cost } &\underline{1,200}\
 \text {  Contribution Margin} &\$800\
 \text {   Fixed Cost} &\underline{300}\
 \text {  Net Income } &\underline{\$500}\
\end{array}$
 If volume reaches 500 units,net income will be:
A) $625
B) $1,800
C) $700
D) None of these

Quizplus · Accepted Answer

The contribution margin per unit is $800/400 = $2. The additional 100 units will contribute $200 (100 units x $2). Adding this to the original net income of $500 gives $700.

The Following Income Statement Was Produced When Volume of Sales