QUESTION 6

1. Information concerning Label Corporation's operations follows:

   		Total	Per-unit
   Sales (1,000 units)		$300,000	$300
   Variable expenses		240,000	240
   Contribution margin		60,000	60
   Fixed expenses		20,000
   Degree of operating leverage	1.5
   Contribution margin ratio	0.2 (20%)

   Assuming that Label increased sales by $90,000 (by 30%) and fixed expenses remain the same, by what amount or percent will net operating income increase?

   		$27,000
   		30%
   		$18,000
   		9%
   		$90,000