Question

Greg’s Golf Carts produces two models: Model 24 has sales of 500 units with a contribution margin of $40 each; Model 26 has sales of 350 units with a contribution margin of $50 each. If sales of Model 24 increase by 100 units, how much will profit change?

Answer 1

$5,000 increase

Step-by-step explanation:

Data provided as per the question is below:-

Contribution margin = $50

Increase units = 100

The computation of profit is shown below:-

Model 24 Sales Increase By 100 units

Profit will increase = Contribution margin × Increase units

= $50 × 100 units

= $5,000 increase

Therefore for computing the profit increase we simply multiply the contribution margin with increase units.