Question

Whirly Corporation's contribution format income statement for the most recent month is shown below: Per Unit $34.00 19.00 $15.00 Total $ 302,600 169,100 Sales (8,900 units) Variable expenses Contribution margin 133,500 Fixed expenses 55,300 Net operating income $78,200 Required: (Consider each case independently): 1. What would be the revised net operating income per month if the sales volume increases by 80 units? 2. What would be the revised net operating income per month if the sales volume decreases by 80 units? 3. What would be the revised net operating income per month if the sales volume is 7,900 units? 1. Revised net operating income 2 Revised net operating income 3. Revised net operating income

Answer 1

Req 1.
Revised Net income when sales increases by 80 units:
Net Operating income				78200
Add: Increased contribution (80*15)				1200
Revised Net Income				79400
Req 2.
Revised Net income when sales decreases by 80 units:
Net Operating income				78200
Less: Reduced contribution (80*15)				1200
Revised Net Income				77000
Req 3.
Sales (7900*34)				268600
Less: variable expenses (7900*19)				150100
Contribution margin				118500
Less: fixed expenses				55300
Net Operating income				63200

2)

Sales Required to earn desired profit =( Fixed Expenses + Target Profit)/ Contribution per unit

= ($31800+$6700)/($140-$70)

= 550 Units

Sales Required to earn desired profit =( Fixed Expenses + Target Profit)/ Contribution per unit

= ($31800+$9600)/($140-$70)

= 592 Units

Dollar amount = 592*140 =$82,880