The Following Is Addison Corporation's Contribution Format Income Statement for Last

question 50

Multiple Choice

The following is Addison Corporation's contribution format income statement for last month:

$\begin{array} { | l | r | } \hline \text { Sales } & \$ 1,000,000 \\\hline \text { Less: variable expenses } & \underline { 700,000 } \\\hline \text { Contribution margin } & 300,000 \\\hline \text { Less: fixed expenses } & \underline { 180,000 } \\\hline \text { Operating income } & \$ 120,000 \\\hline\end{array}$ 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 operating income increase?

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

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Definitions:

Economic Inefficiency

A situation in which resources are not used in the most effective way, leading to potential losses in productivity or value.

Consumer Preferences

The specific desires, likes, and dislikes that influence the purchasing behavior of consumers.

Economic Profit

The profit a company makes after deducting both its explicit (actual cash outflows) and implicit (opportunity) costs.

Profit Motive

The driving force behind business activities focused on achieving financial gain.