Last month when Harrison Creations, Inc., sold 40,000 units, total sales were $300,000, total variable expenses were

Question:

Last month when Harrison Creations, Inc., sold 40,000 units, total sales were $300,000, total variable expenses were $240,000, and total fixed expenses were $45,000.

Required:
1. What is the company’s (CM) ratio?
2. Estimate the change in the company’s net operating income if it were to increase its total sales by $1,500.

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...