zipee inc.s unit selling price is $90, the unit variable costs are $40.50, fixed costs are $170,000, and current sales are 12,000 units. how much will operating income change if sales increase by 5,000 units?

a. $175,000 increase
b. $125,000 decrease
c. $247,500 increase
d. $75,000 increase

Question

zipee inc.s unit selling price is $90, the unit variable costs are $40.50, fixed costs are $170,000, and current sales are 12,000 units. how much will operating income change if sales increase by 5,000 units?

a. $175,000 increase
b. $125,000 decrease
c. $247,500 increase
d. $75,000 increase

Accepted Answer

{ "quality": "clear", "question_count": 1, "skills_matched": [ "step_cot", "multiple_choice_formatter", "explain_then_answer", "tutor", "mastery_adaptive_brevity" ], "needs_drawing": false, "concepts_used": [ "Unit Contribution Margin", "Operating Income Sensitivity" ], "new_concepts": [], "current_concepts": [ "Unit Contribution Margin", "Operating Income Sensitivity", "Fixed Cost", "Variable Cost" ] } ## Calculate unit contribution margin Using the *Unit Contribution Margin* knowledge point $$ \begin{aligned} \text{Unit Selling Price} &= \$90.00 \ \text{Unit Variable Cost} &= \$40.50 \ \text{Unit Contribution Margin} &= \text{Unit Selling Price} - \text{Unit Variable Cost} \ &= \$90.00 - \$40.50 \ &= \$49.50 \end{aligned} $$ ## Determine change in operating income Using the *Operating Income Sensitivity* knowledge point $$ \begin{aligned} \Delta \text{Sales Volume} &= 5,000 \text{ units} \ \Delta \text{Operating Income} &= \Delta \text{Sales Volume} \times \text{Unit Contribution Margin} \ &= 5,000 \times \$49.50 \ &= \$247,500 \text{ increase} \end{aligned} $$

a. $175,000 increase

b. $125,000 decrease

c. $247,500 increase

d. $75,000 increase

{ "subject": "Business", "question_type": "Multiple Choice", "knowledge_point": [ "Business", "Accounting", "Cost-Volume-Profit Analysis" ] }

Sovi.AI - AI Math Tutor

QUESTION IMAGE

Question

Explanation:

Calculate unit contribution margin

Determine change in operating income

Answer: