Answer
Answer (1)
Contribution margin ratio (W-1) 40%
Answer (2)
Change in net operating income (W-2) 400
Work Step by Step
(W-1)
Sales 200,000
Less: Variable costs (120,000)
Contribution margin 80,000
CM ratio (80,000 / 200,000) = 40%
(W-2)
Revised sales (200,000 + 1,000) = 201,000
Revised Contribution margin (201,000 \times 40%) = $80,400
Less: Fixed costs (65,000)
Revised net operating income (80400 - 65,000) = 15,400
Current net operating income
(200,000 - 120,000 - 65,000) = 15,000
Change in net income (15,400 - 15,000) = 400
Comment: The net operating income will increase by 400.
