Homework Answers
Contribution margin = Selling price - Variable cost
= 42 - 16
= $26
Fixed cost = 142,000
Units sold = 10,000 units
Profit
= 10,000*26 - 142,000
= $118,000
Revised units sold
= 10,000 + 10,000*30%
= 13,000 units
Profits will increase by the increase in number of units multiplied with the contribution margin.
Therefore increased profit
= 13,000*26
= $338,000
Less fixed cost = 142,000
= $196,000
Increase in profit
= 196,000 - 118,000
= 78,000
Increase in profit in percentage
= 78,000/118,000
= 66.10%
Therefore the correct option is 2nd.
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