Question

! Required information 5 [The following information applies to the questions displayed below.) Oslo Company prepared the following contribution format income statement 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 $ 35,000 21,000 14,000 8,400 $ 5,600 3. What is the variable expense ratio? Variable expense ratio %

Answer 1

Q3 variable expense ratio = variable expense / sales * 100

= 21,000 / 35,000 * 100

= 60%

Q4 net operating income at 1001 units = {(35000 * 1001 / 1000) * (1-0.6)} - 8400

= (35035 * 0.4) - 8400

= 5614

Increase in net operating income = 5614 - 5600 = 14