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17 January, 17:49

Variable costs as a percentage of sales for Lemon Inc. are 71%, current sales are $526,000, and fixed costs are $178,000. How much will operating income change if sales increase by $45,800?

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  1. 17 January, 20:19
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    There will be a operating loss of $12,178

    Step-by-step explanation:

    Variable costs are those will vary will the change in sale or activity level e. g material cost, labor cost etc.

    Fixed costs are those which remains fix and does not vary with the change in sale or activity level.

    As per Given Data

    Sales = $526,000

    Variable Cost = 71% of Sales

    Fixed Cost = $178,000

    As per Given Condition

    Revised Sales = $526,000 + $45,800 = $571,800

    Net Income Calculations:

    Sales $571,800

    - Variable cost 71% $405,978

    - Fixed Cost $178,000

    = Operating loss $12,178
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