Question

Dimitrov Corporation, a company that produces and sells a single product, has provided its contribution format income statement for July. Sales (7,100 units) $ 326,600 Variable expenses 181,050 Contribution margin 145,550 Fixed expenses 105,500 Net operating income $ 40,050 If the company sells 7,000 units, its net operating income should be closest to:

Answer 1

$38,000

Step-by-step explanation:

The computation of the net operating income is shown below;

The Contribution margin per unit is

= Contribution margin ÷ Sales Volume

= $145,550 ÷ 7,100 units

= $20.5

Now

Net operating income = Contribution margin per unit × Sales Volume - Fixed expenses

= 20.5 × 7000 - $105,500

= $38,000