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Home Q & A Board Other Fields Homework Help Business Accounting
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fluffycookie fluffycookie
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5 years ago
Molina Company has provided the following information:

Sales$779,000
Variable expenses508,000
Fixed expenses213,000

Which of the following statements is true, if the sales volume increases by 10%?
A) Operating income will increase by $5,800.
B) Operating income will increase by $27,100.
C) Fixed expenses will increase by $21,300.
D) Contribution margin will increase by $77,900.
Textbook 
Horngren's Accounting

Horngren's Accounting


Edition: 11th
Authors:
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#1
5 years ago
 B
Explanation:  B)
Contribution margin = $779,000 - $508,000 = $271,000

Revised sales:
Sales$779,000
10% of sales$77,900
Total sales$856,900

Revised variable expenses:
Variable expenses$508,000
10% of variable expenses50,800
Total variable expenses$558,800

Revised contribution margin:
Sales$856,900
Less variable costs(558,800)
Contribution margin$298,100

Effect on contribution margin:
Revised contribution margin$298,100
Less old contribution margin(271,000)
Increase in contribution margin$27,100
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