Last month when Holiday Creations, Inc., sold 40,000 units, total sales were $293,000, total variable expenses were $240,260, and fixed expenses were $39,300.
Required:
1. What is the company’s contribution margin (CM) ratio?
2. What is the estimated change in the company’s net operating income if it can increase total sales by $2,700?
Contribution margin ratio
= Contribution margin/Sales
= (293,000-240,260) / 293,000
= 18%
Increase in net operating income
= 2700 * 18%
= 486
Last month when Holiday Creations, Inc., sold 40,000 units, total sales were $293,000, total variable expenses...