E plc operates a marginal costing system. For the forthcoming year, variable costs are budgeted to be 60% of sales value and fixed costs are budgeted to be 30% of sales value.
If E plc increases its selling prices by 10%, and if fixed costs, variable costs per unit and sales volume remain unchanged, the effect on E plc’s contribution would be:
A . a decrease of 6% B . an increase of 10% C . an increase of 25% D . an increase of 100%
I was work it out of this answer, is it correct? Before; Sales price 100 Variable cost 60 ——- Contribution 40 ——–
After; Sales price 110 Variable cost 60 ——— Contribution 50 ——— B .The increase in contribution from 40 to 50 is an increase 10%.