Question

Whirly Corporation’s contribution format income statement for the most recent month is shown below:

	Total			Per Unit
Sales (7,700 units)	$	238,700		$	31.00
Variable expenses		146,300			19.00
Contribution margin		92,400		$	12.00
Fixed expenses		55,000
Net operating income	$	37,400

Required:

(Consider each case independently):

1. What would be the revised net operating income per month if the sales volume increases by 30 units?

2. What would be the revised net operating income per month if the sales volume decreases by 30 units?

3. What would be the revised net operating income per month if the sales volume is 6,700 units?

	1. Revised net operating income 2. Revised net operating income 3. Revised net operating income

Answer 1

1 Revised Net Operating Income $37,760 2 Revised Net Operating Income $37,040 3 Revised Net Operating Income $25,400 Working Notes: Contribution Margin per Unit = $12 Net Operating Income = $37,400 Fixed Expenses =55,000 a Incresed sales volume = 30 Change in Net Operating Income = Change in sales Volume * Contribution margin per unit = 30*$12 = $360 Revised Net Operating Income = $37,400+$360 = $37,760 b Decreased sales volume = 30 Change in Net Operating Income = Change in sales Volume * Contribution margin per unit = 30*$12 = $360 Revised Net Operating Income = $37,400-$360 = $37,040 c. Sales Volume = 6,700 Units Contribution Margin = 6,700*$12 =$80.400 net operating Income = Contribution margin - Fixed expenses = $80.400-$55,000 = $25,400