Final answer:
For every percentage increase in sales revenue, net income increases by the percentage of the Net Profit Margin. Other factors like Contribution Margin and Operating Expenses are part of overall profit calculations, but it's the Net Profit Margin that determines the exact increase in net income with respect to sales revenue increases.
Step-by-step explanation:
For every % increase in sales revenue, net income will increase by whatever the Net Profit Margin is. The Net Profit Margin is calculated as the ratio of net income to revenue and represents what percentage of sales has turned into profit. This means that for every increase in sales revenue, net income increases by the net profit margin percentage of that increase. The percentage increase in net income won't be affected by the Contribution Margin, Operating Expenses, or Sales Margin directly, although these factors do contribute to the calculation of the overall net profit margin.
Each business aims to maximize profits, which are the difference between total revenue and total costs. Aligning prices with market elasticity is one strategy that businesses use to optimize their total revenue. When marginal costs are equal to marginal revenue, profit does not change; if marginal costs exceed marginal revenues, profits decline. Therefore, in calculating the profitability of additional units sold, businesses must consider the marginal cost compared to the additional revenue those units generate.