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This will result in a 24.76% [($157,200 $126,000)/$126,000 = 24.76%] increase in operating income as follows: 3-42 EA Sales revenue: 30,000 1.20 $25 Variable costs: 30,000 1.20 ($15 $4 0.25) Contribution margin: 30,000 1.20 $11 Fixed costs: $174,000 1.20 + $30,000 Operating income $900,000 504,000 396,000 238,800 $157,200 The point of this problem is that managers always need to consider broader rather than narrower alternatives to meet ambitious future or stretch goals

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