Question

Selling price per unit Variable expenses per unit Fixed expenses per month $ 100 $ 40 $60,000 If sales volume were to decrease 15%, from 4,000 units per month to 3,400 units per month, operating income would:

Answer 1

Selling price per unit = $100

Variable expenses per unit = $40

Fixed expenses per month = $60,000

Income statements

	When 4,000 units are sold	When 3,400 units are sold
Sales	4,000 x 100 = $400,000	3,400 x 100 = 340,000
Variable expenses	4,000 x 40 = - $160,000	3,400 x 40 = - 136,000
Contribution margin	$240,000	204,000
Fixed expenses	- $60,000	- 60,000
Operating income	$180,000	$144,000

If sales volume decreases from 4,000 units to 3,400 units, operating income would decrease by $36,000 (180,000 - 144,000)

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