Question

Whirly Corporation's contribution format income statement for the most recent month is shown below: Sales (7,300 units) Variable expenses Contribution margin Fixed expenses Net operating income Total $ 248,200 138,700 109,500 54,100 $ 55,400 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 90 units? 2. What would be the revised net operating Income per month if the sales volume decreases by 90 units? 3. What would be the revised net operating income per month if the sales volume is 6,300 units? 1. Revised net operating income 2. Revised net operating income 3. Revised net operating income

Answer 1

1 Revised Net Operating Income $56.750 2 Revised Net Operating Income $54,050 3 Revised Net Operating Income $ 40,400 Working Notes: Contribution Margin per Unit = $15 Net Operating Income = $55,400 Fixed Expenses =$54.100 a Incresed sales volume = 90 Change in Net Operating Income = Change in sales Volume * Contribution margin per unit = 90*$15 = $1,350 Revised Net Operating Income = $55,400+$1,350 = $56,750 b Decreased sales volume = 90 Change in Net Operating Income = Change in sales Volume * Contribution margin per unit = 90*$15 = $1,350 Revised Net Operating Income = $55,400-$1,350 = $54,050 c. Sales Volume = 6,300 Units Contribution Margin = 6,300*$15 = $94,500 net operating Income = Contribution margin - Fixed expenses = $94.500-$54.100 = $40,400