Answer
A 7% decrease in units sold (revenue) would mean that variable costs will also decline with the same proportion - causing contribution margin to decrease as well. The budgeted operating income for this deviation can be worked out as follows;
Work Step by Step
(W-1): 10,400,000 × 93% = USD 9,672,000
(W-2): 7,900,000 × 93% = USD 7,347,000
