Profit Increase from Additional Contribution Margin

Steps:

• Contribution margin per unit = 75% × $20 sales price =$15.
• Additional units sold = 15,000 - 10,000 = 5,000.
• Increase in total contribution = 5,000 × $15 =$75,000.
• Since fixed costs are unchanged, profit increase = $75,000.

Why B is correct:

• Profit rises by the full additional contribution margin, per break-even analysis, as fixed costs do not vary with volume.

Why the others are wrong:

• A: Underestimates by possibly deducting fixed costs from incremental units.
• C: Gives total new profit ($195,000), not the increase from original.
• D: Matches new total contribution ($225,000), ignoring fixed costs.

Final answer: B