SOLUTION-
1) contribution margin ratio= (contribution margin/ sales)*100
contribution margin= sales- variable cost= 3,14,000-2,29,220= 84,780
contribution margin ratio=(84,780/314000)*100= 27%
2) net operating income= contribution margin - fixed expenses
i) when sales were 3,14,000
net operating income= 84780( calculated above)-36400= 48,380 (a)
ii)when sales were increased by 2,400 (i.e total sales after increase is 3,14,000+2,400=3,16,400)
contribution margin ratio remains same irrespective number of units sold. in this case sale is increased which indicates that company has sold more units.
now, contribution margin=contribution margin ratio*sales=27%*3,16,400=85428
net operating income=85,428-36400= 49,028 (b)
change in net operating income=(b)-(a)= 49,028-48,380=648
change in net operating income( in %)
= (change in net operating income/ net operating income before change in sales)*100
=(648/ 48,380)*100=1.34%
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