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    Impacts on net income

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    A company has provided the following data:
    Sales 3000 units
    Sales Price $70 per unit
    Variable cost $50 per unit
    Fixed cost $25000

    If the dollar contribution margin per unit is increased by 10%, total fixed cost is decreased by 20%, and all other factors remain the same, net operating income will:
    A. increase by $61,000.
    B. increase by $20,000.
    C. increase by $3,500.
    D. increase by $11,000.

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    Solution Preview

    The current operating income is
    Operating income = total contribution margin - fixed cost = (70-50) X ...

    Solution Summary

    The solution explains the correct option from the given alternatives.