Answer
3-19(1)
Revised Contribution margin (W-1) 2,775,000
Less: Fixed Costs (2,100,000)
Budgeted operating income 675,000
Original budget operating income
(10,400,000 - 7,900,000 - 2,100,000) 400,000
Increase in Operating Income (675,000 - 400,000) 275,000
An 11% increase in contribution margin will cause operating income to
increase by USD 275,000 as calculated above.
Work Step by Step
(W-1)
Original contribution margin (10,400,000 - 7,900,000) = 2,500,000
Revised Contribution margin (2,500,000 × 1.11) = 2,775,000
