Variable costs as a percentage of sales for Lemon Inc. are 71%, current sales are $526,000, and fixed costs are $178,000. How much will operating income change if sales increase by $45,800?

Question

Mathematics

Micah Fields

1 February, 03:08

Variable costs as a percentage of sales for Lemon Inc. are 71%, current sales are $526,000, and fixed costs are $178,000. How much will operating income change if sales increase by $45,800?

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Answers (1)

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Layne Gross · Answer 1

There will be a operating loss of $12,178

Step-by-step explanation:

Variable costs are those will vary will the change in sale or activity level e. g material cost, labor cost etc.

Fixed costs are those which remains fix and does not vary with the change in sale or activity level.

As per Given Data

Sales = $526,000

Variable Cost = 71% of Sales

Fixed Cost = $178,000

As per Given Condition

Revised Sales = $526,000 + $45,800 = $571,800

Net Income Calculations:

Sales $571,800

- Variable cost 71% $405,978

- Fixed Cost $178,000

= Operating loss $12,178