Sutton Company produces flash drives for computers, which it sells for $20 each.Each flash drive costs $6 of variable costs to make.During April, 700 drives were sold.Fixed costs for April were $4 per unit for a total of $2,800 for the month.How much does Sutton's operating income increase for each $1,000 increase in revenue per month?

Question

Quizplus · Accepted Answer

The contribution margin per unit is $14 ($20 - $6). For each $1,000 increase in revenue, the increase in units sold is $1,000 / $20 = 50 units. The increase in operating income is 50 units * $14 = $700.

Sutton Company Produces Flash Drives for Computers, Which It Sells