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Unformatted text preview: Week 3 Problems Acc 561 2-48 (10-15 min.) Amounts are in millions (rounded with slight rounding errors). Net sales (1.10 x $68,222) $75,044 Variable costs: Cost of goods sold (1.10 x $33,125) 36,438 Contribution margin 38,606 Fixed costs: Selling, administrative, and general expenses 21,848 Operating income $16,758 The percentage increase in operating income would be ($16,758 $13,249) - 1 = .26 or 26%, compared with a 10% increase in sales. The contribution margin would increase by 10% or .10 x ($68,222 - $33,125) = $3,510 million. Because fixed costs would not change (assuming the new volume is within the relevant range), operating income would also increase by $3,510 million, from $13,249 million to $16,759 million. If all costs had been variable, costs would have increased by an additional .10 x $21,848 = $2,185 million, making operating income $16,758 - $2,185 = would have increased by an additional ....
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- Spring '12