Question
ABC Company sells a single product at a price of $100 each. The unit variable expense is $70. The company's fixed expenses (step cost)
ABC Company sells a single product at a price of $100 each. The unit variable expense is $70. The company's fixed expenses (step cost) are as follow Production and sales units: Up to 5,000 Over 5,000 Fixed expenses $70,000 $90,000 Currently, 4,000 units are sold and the profit is $50,000. Its Current Operating Leverage is 2.4 and Contribution Margin Ratio is 0.3. If the company increases its sales by 50% (by 2,000 units, or by $200,000), its income will Selected Answer: c. increase by $60,000 (120 %) Answers A increase by $25,000 (50% ) B. increase by $40,000 (80%) c. increase by $60,000 (120%) D. decrease by $20,000 (40%) ABC Company sells a single product at a price of $100 each. The unit variable expense is $70. The company's fixed expenses (step cost) are as follow Production and sales units: Up to 5,000 Over 5,000 Fixed expenses $70,000 $90,000 Currently, 4,000 units are sold and the profit is $50,000. Its Current Operating Leverage is 2.4 and Contribution Margin Ratio is 0.3. If the company increases its sales by 50% (by 2,000 units, or by $200,000), its income will Selected Answer: c. increase by $60,000 (120 %) Answers A increase by $25,000 (50% ) B. increase by $40,000 (80%) c. increase by $60,000 (120%) D. decrease by $20,000 (40%)
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