How much would Beta-Products total income from operations increase?
A)$50,000
B)$150,000
C)$100,000
D)$0

Question

Quizplus · Accepted Answer

If Beta-Products increases its sales volume by 10%, its revenue would increase by 10%. 
Revenue = $1,500,000 x 1.1 = $1,650,000

If the variable expenses decrease by 5%, the new variable cost ratio would be 60% - 5% = 55%. 
Variable expenses = $1,500,000 x 0.55 = $825,000

Therefore, contribution margin = $1,650,000 - $825,000 = $825,000

If the fixed expenses remain the same, the new operating income would be: 
Operating income = $825,000 - $300,000 = $525,000

The increase in operating income would be: 
$525,000 - $375,000 = $150,000

Therefore, the correct answer is B.

How Much Would Beta-Products Total Income from Operations Increase