Respuesta :
Answer:
A. Increase by $7,200
Explanation:
Given: Sales(10,000 units) $120,000
Less variable costs - 48,000
Contribution margin $72,000
Less fixed costs - 24,000
Net income $ 48,000
The total contribution margin is the earning of the company to cover the fixed cost of the company and generate profit. It is important as it shows the amount of money available to pay a fixed cost, which is essential to run the operation of the company. It is calculated by deducting the variable costs from total sales.
Now, finding change in profit after increase in sales by 1000 units.
Contribution margin per unit= [tex]\frac{Contribution\ margin}{number\ of\ units\ sold}[/tex]
⇒ Contribution margin per unit= [tex]\frac{72000}{10000}[/tex]
∴ Contribution margin per unit= [tex]\$ 7.2[/tex]
Multiplying the increase number of unit to the Contribution margin per unit to find change increase in profit.
Increase in profit= [tex]\$ 7.2\times 1000\ units[/tex]
∴ Increase in profit= [tex]\$ 7200[/tex]
Hence, If sales increase by 1,000 units, profit will increase by $7200.
