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Industrial Chemicals Corporation has sales revenue of $2.45 million, variable expenses of $284,000, and fixed expenses of $356,000. If the company’s sales volume increases by 15%, how will this change its operating income?

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Answer:

Increase in income= $324,900

Explanation:

Giving the following information:

Industrial Chemicals Corporation has sales revenue of $2.45 million, variable expenses of $284,000

Increase in volume=  15%

First, we need to calculate the total current contribution margin:

Total contribution margin= 2,450,000 - 284,000= $2,166,000

Income will increase in the same amount as contribution margin:

New contribution margin= 2,166,000*1.15= $2,490,900

Increase in income= 2,490,900 - 2,166,000= $324,900

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