Question

The following information is available for Redwood Corporation for a sales volume of 500 stereo speakers for the past month: Total Per Unit Sales $112,500 $225 Less: Variable expenses 40,000 80 Contribution margin $ 72,500 $145 Less:

Fixed expenses $ 17,500 Net operating income $ 55,000 If sales increase by $51,750, net income will increase by what amount? Select one: A. $33,350 B. $30,000 C. $20,000 D. $22,000

Answer 1

Option A. $33,350

Redwood Corporation
				If sales increase by $51,750
	Total	Per Unit		Total	Per Unit
Sales	112,500	225		164,250	225
Less: Variable expenses	40,000	80		58,400	80
Contribution margin	72,500	145		105,850	145
Less: Fixed expenses	17,500			17,500
Net operating income	55,000			88,350
Net income will increase by what amount?		33,350	Option A		88350-55000