Question

Whirly Corporation’s most recent income statement is shown below: Total Per Unit Sales (8,700 units) $ 261,000 $ 30.00 Variable expenses 156,600 18.00 Contribution margin 104,400 $ 12.00 Fixed expenses 54,200 Net operating income $ 50,200 Required: Prepare a new contribution format income statement under each of the following conditions (consider each case independently):

1. The sales volume increases by 90 units. 2. The sales volume decreases by 90 units. 3. The sales volume is 7,700 units.

Answer 1

Solution:
Given :	Contribution format income statement
	Particulars	$ (Per unit)	Number of units	$ (Total)
	Sales	$                         30	8700	$         261,000
	Less: Variable Expenses	$                         18	8700	$         156,600
	Contribution	$                         12	8700	$         104,400
	Less : Fixed Expense	-	-	$           54,200
	Net Profit			$           50,200
Case 1:	Sales Units Increase by 90 Units, Therefore new sales units is 8790 units
	Contribution format income statement
	Particulars	$ (Per unit)	Number of units	$ (Total)
	Sales	$                         30	8790	$         263,700
	Less: Variable Expenses	$                         18	8790	$         158,220
	Contribution	$                         12	8790	$         105,480
	Less : Fixed Expense	-	-	$           54,200
	Net Profit			$           51,280
Case 2:	Sales Units Decrease by 90 Units, Therefore new sales units is 8610 units
	Contribution format income statement
	Particulars	$ (Per unit)	Number of units	$ (Total)
	Sales	$                         30	8610	$         258,300
	Less: Variable Expenses	$                         18	8610	$         154,980
	Contribution	$                         12	8610	$         103,320
	Less : Fixed Expense	-	-	$           54,200
	Net Profit			$           49,120
Case 3:	New sales units is 7700 units
	Contribution format income statement
	Particulars	$ (Per unit)	Number of units	$ (Total)
	Sales	$                         30	7700	$         231,000
	Less: Variable Expenses	$                         18	7700	$         138,600
	Contribution	$                         12	7700	$           92,400
	Less : Fixed Expense	-	-	$           54,200
	Net Profit			$           38,200