Question

C- The following information relate to Nour Company: Total sales $700,000 (10,000 units) - Total Variable costs $400,000 – Total fixed costs $270,000 Required: (Consider each case separately): 1. If the sales increase by 100 units, what would be the revised net income? 2. If the sales decrease by 200 units, what would be the revised net income? 3. If the sales volume is 9,000 units, what would be the revised net income? In this case, what this sales volume represent? Explain. (5 marks)

Answer 1

Requirement:1

Revised Net Income

$                    33,000

Working:

Nour Company
Net Income Calculation
	Revised [10100 Units	Per Unit
Sales per unit	$                  707,000	$                70
Less:Variable Expenses	$                  404,000	$                40
Contribution Margin	$                  303,000	$                30
Fixed Expenses	$                  270,000
Revised Net Income	$                    33,000	$                 -

Requirement:2

Revised Net Income

$                    24,000

Working:

Nour Company
Net Income Calculation
	Revised [9800 Units	Per Unit
Sales per unit	$                  686,000	$                70
Less:Variable Expenses	$                  392,000	$                40
Contribution Margin	$                  294,000	$                30
Fixed Expenses	$                  270,000
Revised Net Income	$                    24,000	$                 -

Requirement:3

Revised Net Income

$                                -

In this case, Sales volume is Break even sales because net income is zero which represents break even point.

At Break Even Point, there will be no income or loss.

Working:

Nour Company
Net Income Calculation
	Revised [9000 Units	Per Unit
Sales per unit	$                  630,000	$                70
Less:Variable Expenses	$                  360,000	$                40
Contribution Margin	$                  270,000	$                30
Fixed Expenses	$                  270,000
Revised Net Income	$                                -	$                 -