Question

Kelly Company's most recent contribution format income statement is shown below:

Sales (60,000 Units) total:$600,000 per unit:$10

Variable Cost total: 360000 per unit:6

Contribution Margin total:240,000 per unit:4

Fixed Cost total:100,000

Operating Income total:140,000

prepare a new contribution format income statement under each of the following conditions (consider each case independently):

Ther selling price decreases by $2 per unit fixed costs decrease by $30,000 and the variable costs per unit increases by 10% would this change be beneficial please explain

Answer 1

Contribution Income Statement
	Total	Per unit
Sales	$ 480,000.00	8.00 (10-2)
Less: Variable Cost	$ 396,000.00	6.60 (6+6*10%)
Contribution Margin	$ 84,000.00	1.40 (8-6.60)
Less: Fixed expenses	$ 70,000.00	(100000-30000)
Net Operating Income	$ 14,000.00

This change is not beneficial as it will lower the net operating income by $126,000