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Next year, Celebrity wishes to increase the unit selling price to $110. Shipping will change to 2.5% of sales. Cost of goods sold per unit, fixed costs, and sales volume will remain the same. How will these changes affect contribution margin and net income?

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jepessoa

Answer:

net income increased by $1,537.50

Explanation:

Obviously, the original income statement is missing, so I looked for a similar question:

sales revenue                                 $16,500

COGS                                              ($9,300)

Gross profit                                      $7,200

Operating exp.:

  • Administrative $950
  • Depreciation $1,300
  • Shipping $412.50             ($2,662.50)

Net income                                 $4,537.50

net income increased by $4,537.50 - $3,000 = $1,537.50

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