A company has sales of $87,500 at the break-even point and fixed costs are $35,000. Assuming...

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A company has sales of $87,500 at the break-even point and fixed costs are $35,000. Assuming cost behavior does not change if

business accounting

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Answer 1

Answer #1

OPTION C: $8000

EXPLANATION:

Here,

at break even point, contribution margin is equal to fixed costs.

therefore,

Contribution margin = $35000

and

contribution margin ratio = $35000/$87500 = 40%

now,

Increase in operating income = sales x contribution margin ratio

= $20000 x 40%

= $8000

therefore, if sales increases by $20000, operating income will increase by $8000

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Answer 2

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A company has sales of $87,500 at the break-even point and fixed costs are $35,000. Assuming...

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Add Answer to: A company has sales of $87,500 at the break-even point and fixed costs are $35,000. Assuming...

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A company has sales of $87,500 at the break-even point and fixed costs are $35,000. Assuming...