Spice Inc.'s unit selling price is $45, unit variable costs are $40, fixed costs are $115,000,...
Spice Inc.'s unit selling price is $45, unit variable costs are $40, fixed costs are $115,000, and current sales are 9,600 units. How much will operating income change if sales increase by 5,700 units?
a. $28,500 increase b. $48,000 decrease c. $48,000 increase d. $76,500 increase
Homework Answers
a. $28,500 increase
Contribution margin = Sales - Variable cost = $45 - $40 = $5 per unit
Thus, the additional 5,700 units would provide a $28,500 (5,700 units × $5) increase to operating income.
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