Unit Sold: 2,500

Selling Price per unit: ₱ 25

Variable Cost per unit: ₱ 15
Total Fixed Costs: ₱ 15,000

2022 Result 2023 Forecast % Change

Sales Revenue ₱ 62,500 ₱ 68,750 10%
Variable Cost - 37,500 - 41,250 10%
Contribution Margin 25,000 27,500 10%
Total Fixed Costs - 15,000 - 15,000
Operating Profit 10,000 12,500 25%

Formula 1: Formula 2:

% change in Operating Income 25%

% change in Sales 10%
DOL 2.5

Formula 3:

Quantity Sold 2,500

Sales Price per Unit ₱ 25
Variable Cost per Unit ₱ 15
Fixed Cost ₱ 15,000

Q(P-V) 25,000
Q(P-V) F 10,000
DOL 2.5

Analysis: If sales revenue changes by a certain percentage, operating income will change by 2.5 times the percent

This is actually caused by the "amplifying effect" of using fixed costs. Even if sales increase, fixed costs do
 Formula 2:

Contribution Margin 25,000

Operating Income 10,000
DOL 2.5

change by 2.5 times the percentage change in sales. A 10% increase in sales will result in a 25% increase in operating income.

en if sales increase, fixed costs do not change, hence causing a larger change in operating income. This goes the same for decrease in sales
perating income.

he same for decrease in sales. If sales revenues decrease, operating income will decrease at a much larger rate.