Schister Systems uses the following data in its Cost-Volume-Profit analyses:

Total Sales $395,000

Variable expenses 197,500

Contribution margin 197,500

Fixed expenses 119,000

Net operating income $78,500

What is the total contribution margin if sales volume increases by 20%?

contribution margin = $237,000

Explanation:

If sales volume increases by 20%, the sales revenue will increase by 20%. Therefore, the new sales revenue is = $395,000 + ($395,000 * 20%) = $395,000 + 79,000 = $474,000

If sales revenue increases, the variable expenses will also increase by 20%. The new variable expense is = $197,500 + ($197,500 * 20%) = $197,500 + 39,500 = $237,000

We know, sales revenue - variable expenses = contribution margin.

If sales volume increases by 20%,

The new contribution margin = $474,000 - $237,000 = $237,000