Murphy Company produces flash drives for computers, which it sells for $20 each.Each flash drive costs $8 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 Murphy's operating income increase for each $1,000 increase in revenue per month?
A)$600
B)$400
C)$14,000
D)Not enough information to determine the answer.

Question

Quizplus · Accepted Answer

For each $1,000 increase in revenue, the variable cost is $400 (since $8 per unit and 50 units for $1,000 revenue). The contribution margin is $600 ($1,000 - $400). Fixed costs remain unchanged, so operating income increases by $600.

Murphy Company Produces Flash Drives for Computers, Which It Sells