Question

Salter Inc.'s unit selling price is $50, the unit variable costs are $35, fixed costs are $125,000, and current sales are 10,000 units. How much will operating income change if sales increase by 5,000 units?

Answer 1

$75,000

Step-by-step explanation:

Given that,

Unit selling price = $50

Unit variable costs = $35

Fixed costs = $125,000

current sales = 10,000 units

Contribution margin per unit:

= Selling price per unit - unit variable costs

= $50 - $35

= $15

Change in Operating income if sales increase by 5,000 units:

= Increase in sales × Contribution margin per unit

= 5,000 units × $15

= $75,000