Question

Below is the contribution format income statement for a company based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units): Sales Variable expenses Contribution margin Fixed expenses Net operating income $ 55,000 33,000 22,000 14,960 $ 7,040 If the variable cost per unit increases by $1, spending on advertising increases by $1,450, and unit sales increase by 200 units, what would be the new net operating income? (All answers are whole numbers -- unless specified otherwise. You should NOT include the $ sign or a comma. E.g.. you should type 1000 for one thousand. Negative numbers should be added with a minus sign, e.g., -1000 for a decrease or loss of one thousand.) Net operating income after the changes = $

Answer 1

Answer: If variable cost increases by $1, then New Variable cost per unit = $33000 +! loro = $34 per unit. Newfixed cost = $14960 + $1450 $16410. Calculation of New net operating Income are as follows: $66000 Sales ( ) $55000 X1200 units ) 1000 (~) variable experses (1200 units x 834) $40800) contribution Margin $25200 (- fixed expenses ($16410 Now Net operating Income $8790

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