Variable costs as a percentage of sales for Leamon Inc.are 75%,current sales are $600,000,and fixed costs are $110,000.How much will operating income change if sales increase
By $50,000?

Question

Quizplus · Accepted Answer

Variable costs are 75% of sales, so for a $50,000 increase in sales, variable costs increase by $37,500 (75% of $50,000). The contribution margin from the sales increase is $12,500 ($50,000 - $37,500), which increases operating income by $12,500.

Variable Costs as a Percentage of Sales for Leamon Inc