Question

! 15 Required information (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 7. If the variable cost per unit increases by $1, spending on advertising increases by $1,250, and unit sales increase by 150 units, what would be the net operating income? Net operating income

Answer 1

7) The operating Income is calculated as follows:

	$
Sales ($35,000/ 1000 Units) * (1000 Units + 150 Units)	40,250
Variable expenses ($21,000/ 1000 Units + $1 ) * (1000 Units + 150 Units)	25,300
Contribution margin	14,950
Fixed expenses ($8,400 + $1,250)	9,650
Net Operating Income	$5,300

8) The break even point in unit sales is calculated as follows:

The break even point in unit sales = Fixed Cost / Total Contribution Margin Per Unit

Total Contribution Margin Per Unit = Total Contribution Margin / Sales Volume in Units

                                                 = $14,000 / 1000 units

                                                  = $14

The break even point in unit sales = $8,400 / $14

                                                  = 600 units

Break even point 600 units