Pong Incorporated's income statement for the most recent month is given below.
-If Store G sales increase by $40,000 with no change in fixed costs,the overall company net operating income should:
A)increase by $4,000
B)increase by $8,000
C)increase by $24,000
D)increase by $20,000

Question

Pong Incorporated's income statement for the most recent month is given below. 
-If Store G sales increase by $40,000 with no change in fixed costs,the overall company net operating income should:
A)increase by $4,000 
B)increase by $8,000 
C)increase by $24,000 
D)increase by $20,000

Quizplus · Accepted Answer

CM ratio = Contribution margin F1F1F1S1F1F1F10 Sales = $30,000 F1F1F1S1F1F1F10 $60,000 = 0.50
Change in contribution margin = CM ratio F1F1F1S1F1F1F10 Change in sales = 0.50 F1F1F1S1F1F1F10 $40,000 = $20,000
Since there is no change in fixed costs,the net operating income should increase by $20,000.

Pong Incorporated's Income Statement for the Most Recent Month Is