Question

Valdez Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range. Sales (1,000 units) $ 500,000 Variable expenses 200,000 Contribution margin 300,000 Fixed expenses 300,000 Net operating income $ 0 If the company were to sell 20 additional units, by how much would the net operating income increase?

A) $10,000

B) $6,000

C) $60,000

D) cannot be determined with the information given.

Answer 1

Answer:

Option B: $ 6,000

Calculations:

Sales	$    500,000	$    510,000
Less: Variable cost	$    200,000	$    204,000
Contribution margin	$    300,000	$    306,000
Less: Fixed cost	$    300,000	$    300,000
Net operating Income	$              -	$        6,000

Workings:

Hence, option 'B' is correct and rest all are incorrect.

In case of any doubt, please feel free to comment.