Description
As an investor, you want to determine if the ACME Corporation is managing its overhead costs and production costs well. Given the following situations, determine the change in operating income for each (please show your work for credit).
For the following questions assume the company sells its products for $4 each.
1. Calculate the change in operating income if the contribution margin ratio is 35% and there is a 10,000 unit increase in sales.
2. Calculate the change in operating income if the unit contribution margin is $2.10 and there is an increase of $20,000 in sales.
3. Calculate the change in operating income if the contribution margin ratio is 30% and there is an increase in sales of $30,000.
4. Why do investors prefer that ACME has increasing operating income?
Word document
