Ring, Incorporated's income statement for the most recent month is given below.

For each of the following questions, refer back to the original data.
-If Store Q sales increase by $30,000 with no change in fixed expenses,the overall company net operating income should:
A)increase by $3,750
B)increase by $7,500
C)increase by $12,000
D)increase by $18,000

Question

Ring, Incorporated's income statement for the most recent month is given below.
 
For each of the following questions, refer back to the original data. 
-If Store Q sales increase by $30,000 with no change in fixed expenses,the overall company net operating income should:
A)increase by $3,750 
B)increase by $7,500 
C)increase by $12,000 
D)increase by $18,000

Quizplus · Accepted Answer

CM ratio = Contribution margin F1F1F1S1F1F1F10 Sales = $160,000 F1F1F1S1F1F1F10 $400,000 = 0.40
Change in contribution margin = CM ratio F1F1F1S1F1F1F10 Change in sales = 0.40 F1F1F1S1F1F1F10 $30,000 = $12,000
Since there is no change in any other cost,the net operating income should increase by $12,000.

Ring, Incorporated's Income Statement for the Most Recent Month Is