Intermediate E pic operates a marginal costing system. For the forthcoming year, variable costs are budgeted to be 60% of sales value and fixed costs are budgeted to be 10% of sales value.

If E pic increases its selling prices by 10%, but if fixed costs, variable costs per unit and sales volume remain unchanged, the effect on E pic’s contribution would be:

A a decrease of 2%;

B an increase of 5%

C an increase of 10%

D an increase of 25%

E an increase of 66 2/3%.

LO1