Question

Whirly Corporation's contribution format income statement for the most recent month is shown below: Sales (9,000 units) Variable expenses Contribution margin Fixed expenses Net operating income Total $ 297,000 171,000 126,000 55,100 $ 70,900 Per Unit $ 33.00 - 19.00 $ 14.00 Required: (Consider each case independently): 1. What would be the revised net operating income per month if the sales volume increases by 90 units? 2. What would be the revised net operating income per month if the sales volume decreases by 90 units? 3. What would be the revised net operating income per month if the sales volume is 8,000 units? 1. Revised net operating income 2. Revised net operating income 3. Revised net operating income

Answer 1

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Answer to Whirly Corporation

1.

If sales volume is increased by 90units

Contribution Margin from sales of extra 90 units= 90 units * $14

=$1,260

No Impact on Fixed Cost

Hence, Revised net operating income= $70,900 + $1,260

$72,160

2.

If sales volume is decreased by 90units

Loss of Contribution Margin from less sales of 90 units= 90 units * $14

=$1,260

No Impact on Fixed Cost

Hence, Revised net operating income= $70,900 - $1,260

$69,640

3.

If sales volume is 8,000 units

Contribution = 8,000 units * $14

=$112,000

Fixed Cost = $55,100

Revised Net Operating Income = $112,000 - $56,100

=$56,900

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