Question

Whirly Corporation's contribution format income statement for the most recent month is shown below: Sales (7,100 units) Variable expenses Contribution margin Fixed expenses Net operating income Total $ 234,300 142,000 92,300 55,800 $ 36,500 Per Unit $ 33.00 20.00 $ 13.00 Required: (Consider each case independently): 1. What would be the revised net operating income per month if the sales volume increases by 70 units? 2. What would be the revised net operating income per month if the sales volume decreases by 70 units? 3. What would be the revised net operating income per month if the sales volume is 6,100 units? 1. Revised net operating income 2. Revised net operating income 3. Revised net operating income

Answer 1

Revised net operating income = (7100+70)*13 - 55,800 = 37,410

Revised net operating income = (7100-70)*13 - 55,800 = 35,590

Revised net operating income = (6100)*13 - 55,800 = 23,500

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Contribution margin ratio = (Sales - Variable costs) /Sales = (313,000-234,750)/313,000 = 25%

Estimated change = 2400*25% = 600

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