Question

Example 23:  Fill in the effects of each of the following on breakeven point, operating income and net income using:  I = increase, D = Decrease, NC = No Change.

	Breakeven point	Operating Income	Net Income	Contribution Margin
Increase variable costs per unit
Decrease variable costs per unit
Increase variable costs in total
Decrease variable costs in total
Increase fixed costs
Decrease fixed costs
Increase selling price
Decrease selling price
Increase units sold
Decrease units sold
Increase tax rate
Decrease tax rate

Answer 1

Fill the effects of each of following as follows: Net income Cotribution Margin Breakeven Operating Point income Increase variable costs per unit I D Decrese variable costs per unit D Increase variable costs in total I Decrease variable costs in total D Increase fixed costs Decrease fixed costs Increase selling price Derease selling price Increase units sold Decrease units sold Increase tax rate Decrease tax rate NC NC oorooo D NC NC NC NC Explanation: The formulae for Breakeven point, operating income, net income, and contribution margin are as follows: Fixed cost Breakeven point=- Sale price-Variable cost per unit Operating income=0pertaing revenues-Operating expenses Net income=Total revenues-Total expenses Contribution margin=Sale price per unit-Variable cost per unit