Managerial Accounting (15th Edition)

Published by McGraw-Hill Education
ISBN 10: 007802563X
ISBN 13: 978-0-07802-563-1

Chapter 5 - Cost-Volume-Profit Relationships - The Foundational 15 - Required - Page 217: 4

Answer

The increase in net operating income= Number increase in units $\times$ Contribution margin per unit = 1 $\times$ 8 = $8

Work Step by Step

Number increase in units = 1,001 - 1,000 = 1 (unit) Contribution margin per unit = $8 (Calculated in question 1) Because contribution margin per unit shows us the amount of revenue from the sale of one unit after covering the variable expenses, the increase in net operating income would be equal to multiplying the number increase in units with the contribution margin per unit.
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