Answer:
$26,300.
Explanation:
The operating income for the current year is $270,000 (450,000 - 130,000 - 50,000). When sales change, variable costs also change with the change of output, but fixed cost remains the same. So we have to calculate the variables costs when sales increase by $80,000. To do so, variable expense ratio, calculated as variable expense / sales, will be used.
So, variable expense ratio is .29 (130,000 / 450,000).
Calculation for Change in Operating Income when sales are $530,000 (450,000 + 80,000) is as follows:
Sales revenue $530,000
Variable costs (530,000 * .29) (153,700)
Fixed costs (80,000)
Operating Income $296,300
⇒ Operating Income will increase by $26,300 (296,300 - 270,000) when sales increase by $80,000.
