Parvin Company produces flash drives for computers, which it sells for $20 each. Each flash drive costs $6 of variable costs to make. During April, 700 drives were sold. Fixed costs for April were $4 per unit for a total of $2,800 for the month. How much does Parvin's operating income increase for each $1,000 increase in revenue per month?
A) $700
B) $500
C) $14,000
D) Not enough information to determine the answer.

Question

Quizplus · Accepted Answer

The contribution margin per unit is $20 - $6 = $14. For each $1,000 increase in revenue, the increase in units sold is $1,000 / $20 = 50 units. The increase in operating income is 50 units * $14 = $700.

Parvin Company Produces Flash Drives for Computers, Which It Sells