Moylan Company has provided the following information: Which of the following statements is true, if the sales volume increases by 10%?

Question

Moylan Company has provided the following information:  Which of the following statements is true, if the sales volume increases by 10%?

Quizplus · Accepted Answer

To calculate the impact of a 10% increase in sales volume on operating income, we need to use the contribution margin income statement format:

Sales: $950,000 x 1.1 = $1,045,000
Variable Costs: ($475,000 + $150,000) x 1.1 = $698,500
Contribution Margin: $1,045,000 - $698,500 = $346,500
Fixed Costs: $220,000
Operating Income: $346,500 - $220,000 = $126,500

The difference between the original operating income and the new operating income is: $126,500 - $99,200 = $27,300.
Therefore, option B is correct.

Moylan Company Has Provided the Following Information: Which of the Following