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Effects of Revenue Increase on Operating Income

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A firm has revenues of $120,000, a contribution margin ratio of 30%, and fixed expenses that total $56,000. If revenues increase $10,000, then:

operating income will increase by $3000.
operating income will be $3000.
operating income will increase by $7000.

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Solution Summary

Brief explanation on how operating income will fare after a revenue increase, when given the contribution margin and fixed expenses.

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