The income statement for Symbiosis Manufacturing Company for 2018 is as follows: $\begin{array}{lr}
\text { Sales (10,000 units) } & \$ 120,000 \
\text { Variable expenses } &72,000\
\text { Contribution margin } & \$ 48,000 \
\text { Fixed expenses } & 36,000\
\text { Operating income } & \$12,000
\end{array}$
If sales increase by $60,000, what will happen to profit?

Question

Quizplus · Accepted Answer

The contribution margin ratio is calculated as Contribution Margin / Sales = $48,000 / $120,000 = 0.4 or 40%. Therefore, a $60,000 increase in sales would result in a $60,000 * 0.4 = $24,000 increase in profit, after covering the variable expenses. Fixed expenses remain unchanged.

The Income Statement for Symbiosis Manufacturing Company for 2018 Is