By how much would the company's net operating income increase if Minneapolis increased its sales by $75,000 per year? Assume no change in cost behavior patterns.

 

Given,

Increase in sales of Minneapolis = $75,000

Contribution margin ratio of Minneapolis = 40%

Increase in net operating income is calculated using the following formula;

Increase in net operating income = Increase in sales of Minneapolis x Contribution margin ratio of Minneapolis

= 75,000 x 40%

= $30,000

?

Because all the rest of factors are not changing in this case, the net operating income will increase by $30000 if sales of Minneapolis increase by $75,000.