Question

Whirly Corporation's contribution format Income statement for the most recent month is shown below. Sales (10,000 units) Variable expenses Contribution margin Fixed expenses Net operating income Total $ 350,000 200,000 150,000 135,000 $ 15,000 Per Unit $35.00 20.00 $15.00 Required: (Consider each case independently): 1. What would be the revised net operating Income per month of the sales volume Increases by 100 units? 2. What would be the revised net operating Income per month if the sales volume decreases by 100 units? 3. What would be the revised net operating Income per month if the sales volume is 9,000 units? 1. Revised net operating income 2. Revised net operating income 3. Revised net operating income

Answer 1

20 Sales Units Sales Variable Expneses Contribution Margin Fixed Cost Net Operating income 10000 350000 200000 150000 1,35,000 15,000 151 Net Operatting income = (CM per unit * Units) - Fixed Expneses 16,500 Answers Revised Net operating income If sales are increased by 100 Units Revised Net operating income (15*10100-135000 Revised Net operating income If sales are Decreased by 100 units Revised Net operating income (15*9900-135000 Revised Net operating income If sales are 9000 units Revised Net operating income (15*9000)-135000 13,500

2)

a) Contribution Margin Ration = Contribution Margin / Sales

Contribution Margin Ratio = (200,000-120,000) / 200,000 = 40% (Answer)

B) Estimated Change in operating income = 1,000*40% = 400 (Answer)