Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 58

For the following questions, circle the best response. Answers are at the end of this chapter.

Use the following information for Question.

O’Brien, Inc.’s, 2010 contribution margin income statement shows the following:

Sales @ $8 per unit	$ 160,000
Less: Variable expense	(128,000)
Contribution margin	$ 32,000
Less: Fixed expenses	(44,000)
Operating income (loss)	$ (12,000)

What would O’Brien, Inc.’s, operating income (or loss) be if fixed costs were increased by 10 percent and sales volume increased by 30 percent?

a. $1,290.

b. $2,650.

c. $(6,800).

d. $(9,680).

e. None of the above.