Answer
A 7% increase in units sold (revenue) would mean that variable costs will also rise with the same proportion - causing contribution margin to increase as well. The budgeted operating income for this deviation can be worked out as follows;
Work Step by Step
(W-1): 10,400,000 × 1.07 = 11,128,000
(W-2): 7,900,000 × 1.07 = 8,453,000
