Waterproof Roofing Company has provided the following information: $$\begin{array} { | l | r | }
\hline \text { Sales revenue } & \$ 779,000 \
\hline \text { Variable costs } & 506,000 \
\hline \text { Fixed costs } & 216,000 \
\hline
\end{array}$$ Which of the following statements is true, if the sales volume increases by 10%?

Question

Waterproof Roofing Company has provided the following information: $$\begin{array} { | l | r | } 
\hline \text { Sales revenue } & \$ 779,000 \
\hline \text { Variable costs } & 506,000 \
\hline \text { Fixed costs } & 216,000 \
\hline
\end{array}$$ Which of the following statements is true, if the sales volume increases by 10%?

Quizplus · Accepted Answer

Using the formula: 
Operating Income = (Sales Volume x Contribution Margin) - Fixed Expenses

We can calculate the new operating income by increasing the sales volume by 10%:

New Sales Volume = 1.1 x 11ea8553_2bcb_aefe_a343_c329a3a70444_TB5019_00 = 118,608
Contribution Margin = 11ea8553_2bcb_aefe_a343_c329a3a70444_TB5019_00 x 0.32 = 35,520.96
Fixed Expenses = 631,200

New Operating Income = (118,608 x 35,520.96) - 631,200 = 1,082,828.70

The increase in operating income is: 
1,082,828.70 - 1,055,528.70 = $27,300

Therefore, the correct statement is B: Operating income will increase by $27,300.

Waterproof Roofing Company Has Provided the Following Information Which of the Following Statements Is True, If the Sales