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Cullumber Monograms sells stadium blankets that have been monogrammed with high school and university emblems. The...

Cullumber Monograms sells stadium blankets that have been monogrammed with high school and university emblems. The blankets retail for $42 throughout the country to loyal alumni of over 3,300 schools. Cullumber’s variable costs are 42% of sales; fixed costs are $116,000 per month.

Cullumber currently sells 139,000 blankets per year. If sales volume were to increase by 15%, by how much would operating income increase? (Round answer to 0 decimal places, e.g. 5,275.)

Operating income
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Answer #1

Increase in operating income is equal to the increase in contribution margin from additional sales as fixed costs do not change with change in volume

Hence, increase in operating income = (42-42%*42)*139000*15%

= $507,906

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