thank you so much Yellow Companys variable expenses are 40 o

thank you so much

Yellow Company\'s variable expenses are 40% of sales and have monthly fixed expenses of $15,000. The monthly target Operating income is S4800 What is Yellow Company\'s operating income if sales volume increases 10%? O A. 6,780 O B. 19,800 O C. 11,636.36 O D. 5,963.64

Solution

Contribution = Fixed Expenses + Operating Income

= $15,000 + 4,800

= $19,800

Contribution margin Ratio = 100% - Variable Cost Ratio

= 100% - 40%

= 60%

Current Level of Sales = Contribution / Contribution margin Ratio

= $19,800 / 0.60

= $33,000

New level of Sales = $33,000 + [$33,000 x 10%] = $36,300

New Level of Contribution = $36,300 x 60% = $ 21,780

New net operating Income = Contribution Margin – Fixed Expenses

= $21,780 – 15,000

= $6,780

Yellow Company’s Operating Income = $6,780

Hence, The Answer is “A. $6,780”