Question

Oslo Co prepared the following Contribution Format income statement based on sales volume of 1,000 units. (the relevant rage of production is 500 to 1500 units):

Sales 80,000
Var C 52,000
CM 28,000
Fixed 21,840
NOI 6,160

If sales increase to 1,001 units, what would be the increase in NOI?

Answer 1

To calculate the increase in NOI when sales increase to 1,001 units, we need to determine the contribution margin per unit and then calculate the difference in contribution margin between 1,001 units and 1,000 units. The contribution margin per unit is $28 and the increase in NOI would be $28.

Step-by-step explanation:

To calculate the increase in NOI when sales increase to 1,001 units, we need to determine the contribution margin per unit and then calculate the difference in contribution margin between 1,001 units and 1,000 units.

The contribution margin per unit can be calculated by subtracting the variable cost per unit from the selling price per unit. In this case, the selling price per unit is $80,000/1,000 units = $80, and the variable cost per unit is $52,000/1,000 units = $52. Therefore, the contribution margin per unit is $80 - $52 = $28.

The increase in NOI can be calculated by multiplying the increase in units (1,001 - 1,000 = 1) by the contribution margin per unit ($28). Therefore, the increase in NOI would be $28.