Question 174150: Can someone please, please help me with this problem:
Barkley Company has a contribution margin ratio of 25%. The company is considering a proposal that will increase sales by $100,000. What increase in profit can be expected assuming total fixed costs increase by $20,000?
a. $5,000
b. $15,000
c. $20,000
d. $25,000
Answer by Mathtut(3670)   (Show Source):
You can put this solution on YOUR website! Contribution Margin = sales - variable costs.
Contribution Margin Ratio = (sales - variable costs)/sales.
Contribution margin and contribution margin ratio definition and explanation:
Contribution margin is the amount generated by sales to cover fixed costs.
The contribution margin ratio indicates the percent of sales available to cover fixed costs and profits.
so 100,000-20000=80000 would be our margin in this proposed increase
since the contribution margin ratio is 25%: 80000(.25)=20000
:
so C would be our answer.
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