Question

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Exercise 6-1 The Effect of Changes in Activity on Net Operating Income (LO6-1) Whirly Corporation's contribution format income statement for the most recent month is shown below: Sales (8,400 units) Variable expenses Contribution margin Fixed expenses Net operating income Total $ 285,600 159,600 126,000 55,300 $ 70, 700 Per Unit $ 34.00 19.00 $15.00 Required: (Consider each case independently): 1. What would be the revised net operating income per month if the sales volume increases by 60 units? 2. What would be the revised net operating income per month if the sales volume decreases by 60 units? 3. What would be the revised net operating income per month if the sales volume is 7,400 units? 1. Revised net operating income 2. Revised net operating income 3. Revised net operating income

Answer 1

$ 1 Revised net operating Income 2 Revised net operating Income 3 Revised net operating Income 71,600 69,800 55,700 $ Working: 1 Units increase by 60, 8400 + 60 = 8460 units $ $ Working 8460 x 34 8460 x 19 Less Sales (8460 units) Variable Expense Contribution Margin Fixed Expense Net Operating income Total 287,640 160,740 126,900 55,300 71,600 $ Less $ 2 Units decrease by 60, 8400 - 60 = 8340 units Working 8340 x 34 8340 x 19 Less Sales (8340 units) Variable Expense Contribution Margin Fixed Expense Net Operating income $ $ $ $ Total 283,560 158,460 125,100 55,300 69,800 Less 3 Units sold = 7400 Working 7400 x 34 7400 x 19 Less Sales (7400 units) Variable Expense Contribution Margin Fixed Expense Net Operating income $ $ $ $ $ Total 251,600 140,600 111,000 55,300 55,700 Less