Reference: 08-01
the Following Is Addison Corporation's Contribution Format Income

question 122

Multiple Choice

Reference: 08-01
The following is Addison Corporation's contribution format income statement for last month: $$\begin{array} { | l | c | } \hline \text { Sales } & \$ 1,000,000 \\\hline \text { Less variable expenses } & 700,000 \\\hline \text { Contribution margin } & 300,000 \\\hline \text { Less fixed expenses } & 180,000 \\\hline \text { Net income } & \$ 120,000 \\\hline\end{array}$$ The company has no beginning or ending inventories. A total of 20,000 units were produced and sold last month.
-If sales increase by 100 units, by how much should net income increase

• A)$2,500.
• B)$1,500.
• C)$4,800.
• D)$400.

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Definitions:

Total Surplus

The sum of consumer surplus and producer surplus in a market, representing the total net benefit to society from the production and consumption of goods and services.

Equilibrium

A state in which market supply and demand balance each other, resulting in stable prices and quantities.

Positively Sloped

A line or curve on a graph that moves upward and to the right, indicating a direct relationship between two variables.

Negatively Sloped

Describes a line on a graph that moves downward from left to right, indicating an inverse relationship between two variables.