Laredo,Inc.has a contribution margin ratio of 45%.This month,sales revenue was $200,000,and profit was $40,000.If sales revenue increases by $20,000,by how much will profit increase?
A)$1,800
B)$4,500
C)$5,000
D)$9,000

Question

Quizplus · Accepted Answer

Given a contribution margin ratio of 45%, an increase in sales revenue of $20,000 would result in an increase in contribution margin (and thus profit, assuming fixed costs do not change) of 45% of $20,000, which is $9,000.