Company XYZ is currently operating with a 60% contribution margin. The company is planning an upgrade in its production facilities, which is expected to increase sales by $15,000. However, this upgrade is expected to increase fixed costs of $2,500. What would be the expected change in profit?

Company XYZ is currently operating with a 60% contribution margin. The company is planning an upgrade in its production facilities, which is expected to increase sales by $15,000. However, this upgrade is expected to increase fixed costs of $2,500. What would be the expected change in profit?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 20MC: Wallace Industries has total contribution margin of $58,560 and net income of $24,400 for the month...

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Question

Profit would remain unchanged
Company XYZ is currently operating with a 60% contribution margin. The company is planning an upgrade in its
production facilities, which is expected to increase sales by $15,000. However, this upgrade is expected to increase
fixed costs of $2,500. What would be the expected change in profit?
O a.
Increase by $15,000
Finis
O b. Decrease by $2,500
C.
Increase by $6,500
O d. Increase by $12,500
O e. Decrease by $6,000
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