Question

Frontier Corp. has fixed costs of $57,500 and profit of $230,000. If sales increase 20%, by how much will profits increase

Answer 1

Increase in profit= $57,500

Step-by-step explanation:

Giving the following information:

Frontier Corp. has fixed costs of $57,500 and profit of $230,000.

First, we need to calculate the total current contribution margin:

Current total contribution margin= 230,000 + 57,500= $287,500

Now, the new contribution margin and new profit:

New total contribution margin= 287,500*1.2= $345,000

New profit= 345,000 - 57,500= $287,500

Finally, the increase in profit:

Increase in profit= 287,500 - 230,000= $57,500