Manero Company included the following information in its annual report: 20X3 20X2 20X1 Sales$178,400 $162,500 $155,500 Cost of goods sold 115,000 102,500 100,000 Operating expenses 50,000 50,000 45,000 Operating income 13,400 10,000 10,500 In comparison to year 20X2, the increase in operating income of 20X3 was primarily caused by the effect of margin increase of (ignore taxes):Multiple Choice$2,422.$3,400.$978.$1,194.

Manero Company

In comparison to year 20X2, the increase in operating income of 20X3 was primarily caused by the effect of margin increase of

= $3,400.

Explanation:

a) Data and Calculations:

                                    20X3        20X2         20X1

Sales                        $178,400  $162,500 $155,500

Cost of goods sold    115,000    102,500   100,000

Operating expenses 50,000     50,000     45,000

Operating income      13,400      10,000      10,500

Increase in operating income of 20X3 compared to 20X2 is $3,400 ($13,400 - $10,000)

This increase represents 34% increase in the margin of 20X3 when compared to 20X2.  The increase resulted from increased sales revenue.

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