Question

5 Quiz Help Save Exercise 5-1 The Effect of Changes in Activity on Net Operating Income [L05-1) Whirly Corporation's contribution format income statement for the most recent month is shown below: $ 230,400 32.00 sales (7,200 units) Variable Contribution margin Pixed expenses 144.00020.00 86,400 $ 12.00 54,600 $ 31,800 (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 6,200 units? net income 3. Revised net operating income < Prev1 of 4l Next >

Answer 1

Case-1​ INCREASE BY 60 UNITS

As the per unit contribution is $12 and fixed expenses will remain same, Revised Net operating income will be $31,800 +($12*60units)=$32,520.

Case-2​ DECREASE BY 60 UNITS

As the per unit contribution is $12 and fixed expenses will remain same, Revised Net operating income will be $31,800 - ($12*60units)=$31,080.

Case-3​ Sales Volume of 6200 units.

Sale Volume of 6200 units means a reduction of 1000 units from the current level of 7200 units. As the per unit contribution is $12 , the revised Net operating income will be -

$31,800 - (1000units*$12)=$19,800