A Company Has Provided the Following Data If the Dollar Contribution Margin Per Unit Is Increased by Sales

question 60

Multiple Choice

A company has provided the following data:
$\begin{array}{|l|r|}\hline \text { Sales } & 3,000 \text { units } \\\hline \text { Sales price } & \$ 70 \text { per unit } \\\hline \text { Variable cost } & \$ 50 \text { per unit } \\\hline \text { Fixed cost } & \$ 25,000 \\\hline\end{array}$
If the dollar contribution margin per unit is increased by 10%,total fixed cost is decreased by 20%,and all other factors remain the same,what will the outcome be for operating income?

• A) Increase by $61,000.
• B) Increase by $20,000.
• C) Increase by $3,500.
• D) Increase by $11,000.

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Definitions:

Variable Cost

A cost that varies with the level of output or sales, such as materials or commissioned labor.

Fixed Cost

A cost that does not vary with the level of output or sales over a certain period, such as rent or salaries.

Break-even Point

The point at which total costs and total revenue are equal, meaning no profit or loss is made, illustrating the minimum sales volume needed to cover fixed and variable costs.

Sales Mix

Sales mix refers to the proportion of different products or services sold by a company, influencing decisions on pricing, marketing, and production.