The Incredible Donut owns and operates six doughnut outlets in and around Kansas City.

You are given the following corporate budget data for next year:

Revenue Variable Cost Contribution Margin Fixed Cost Budgeted Operating Income
10,400,000 7,900,000 2,500,000 2,100,000
Variable costs change based on the number of doughnuts sold.

Required:

Compute the budgeted operating income for each of the following deviations from the original budget data.

(Consider each case independently)

1. An 11% increase in contribution margin, holding revenues constant.

2. An 11% decrease in contribution margin, holding revenues constant.

3. A 4% increase in fixed costs.

4. A 4% decrease in fixed costs.

5. A 7% increase in units sold.

6. A 7% decrease in units sold.

7. An 11% increase in fixed costs and a 11% increase in units sold.

8. A 4% increase in fixed costs and a 4% decrease in variable costs.

9. Which of these alternatives yields the highest budgeted operating income?