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

Operating income increases by the increase in contribution margin, which is sales revenue increase minus variable costs increase. With a 10% increase in sales revenue, the increase is $77,900 ($779,000 * 10%). The variable cost increase is $50,600 ($506,000 * 10%). The increase in operating income is the difference, $27,300 ($77,900 - $50,600). Fixed expenses remain unchanged, and the contribution margin increase does not equal the sales revenue increase directly.

Waterproof Roofing Company Has Provided the Following Information Which of the Following Statements Is TRUE,if the Sales Volume