Fritz, Inc.'s unit selling price is $75, the unit variable costs are $45, fixed costs are $150,000, and current sales are 10,000 units. How much will operating income change if sales increase b

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Fritz, Inc.'s unit selling price is $75, the unit variable costs are $45, fixed costs are $150,000, and current sales are 10,000 units. How much will operating income change if sales increase by 5,000 units

$150,000 increase

Explanation:

Fritz has a unit selling price of $75

The unit variable cost is $45

The fixed costs are $150,000

The current sales are 10,000 units

The first step is to calculate the contribution margin

Contribution margin= sales price - variable cost

= $75-$45

= $30 per unit

Therefore, the change in the operating income when sales increase by 5,000 units can be calculated as follows

= 5,000 units × $30

= $150,000 increase

Hence the operating income will increase by $150,000 when there is an increase in the sales by 5,000 units

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